In a significant announcement on February 24, 2024, Wu Yongming, the CEO of Alibaba Group, unveiled ambitious plans for the coming three years, disclosing that the company intends to invest a staggering 380 billion yuan (approximately $58 billion) in the development of cloud and artificial intelligence (AI) hardware infrastructureThis monumental investment marks the largest ever for a private enterprise in China aimed at enhancing cloud and AI foundations, surpassing the total amount spent in the past decadeSuch a move is positioned at the forefront of China’s technological advancement, showcasing Alibaba’s commitment to leading in the digital economy.

Wu articulated a vision of an unexpected acceleration in AI development, asserting, “The explosion of AI has far surpassed expectations; the Chinese tech industry is burgeoning with immense potentialAlibaba will spare no effort in accelerating the construction of cloud and AI hardware infrastructure, thereby catalyzing the development of the entire industry ecosystem.” This statement encapsulates Alibaba’s adaptive strategy in the face of a rapidly evolving digital landscape and reveals the company's profound belief in the symbiotic relationship between technology and industry growth.

This marked the first instance where Alibaba detailed financial aspirations for AI infrastructure over the next three yearsDuring a recent earnings call, Wu had highlighted this future capital outlay, indicating that the monetary commitment to cloud and AI infrastructure would exceed the total investment made in the previous ten yearsHe reaffirmed Alibaba's focus on three primary business sectors: domestic and international e-commerce, a technology business focused on AI and cloud computing, and various internet platform productsStrategic emphasis will be placed on AI as the core of this vision, with heightened investments planned in three key areas: foundational AI infrastructure, foundational model platforms, and AI-native applications, as well as the AI transformation of existing business operations.

The recent quarterly financial report reflected Alibaba's vigorous expansion

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For the third quarter of the fiscal year 2025, the company reported capital expenditures reaching 31.8 billion yuan, reflecting a year-on-year increase of 331% and a quarter-on-quarter growth of 85%. This surge not only illustrates Alibaba's robust financial health but also its strategic pivot towards the future technological landscape.

Historical investment figures reveal that Alibaba’s total capital outlay on AI infrastructure over the past decade had cumulatively amounted to approximately 327.2 billion yuan from 2015 to 2024. This indicates that the anticipated average annual capital expenditures in the coming three years are projected to surpass 110 billion yuan, further solidifying Alibaba’s role as a leading player in the technology sector.

Taking into account the recent quarterly expenditure of 31.4 billion yuan, some analysts at Guozheng International Securities estimated that Alibaba's annual capital expenditure could range from 100 billion to 150 billion yuanMeanwhile, Guojin Securities forecasted that based on the reported quarterly expenditure exceeding 30 billion yuan, Alibaba's capital spending for the entire fiscal year 2025 may aim for around 120 billion yuan, with about 50 billion yuan specifically allocated for servers, benefiting domestic server manufacturers immenselyMoreover, significant allocations near 8 billion yuan have been projected for switches, and close to 3.6 billion yuan for optical modulesIDC-related suppliers are also anticipated to capitalize on the large-scale computational infrastructure developments slated for 2025.

With Alibaba Cloud recognized as a leading cloud computing company in Asia, Alibaba has also made strides in AI, particularly with its Tongyi Qianwen large language model, which has gained renown as a widely acknowledged open-source modelRecently, the company introduced its flagship model, Qwen 2.5-Max, built on a MoE architecture, achieving unparalleled performances in various authoritative benchmark tests

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Access to this model has been made available to users and enterprises through platforms like QwenChat and “Bailian.” As of January 31, 2025, the family of models based on Qwen has surpassed 90,000 derivative models on Hugging Face, establishing it as one of the largest AI model families globally.

On February 13, Alibaba’s co-founder Joseph Tsai confirmed a collaborative effort with Apple to integrate AI functionalities into the Chinese iPhone, signifying a remarkable partnershipThis collaboration includes the development of a built-in system for analyzing and modifying Apple’s AI models, with predictions suggesting that these features may be rolled out by MayThis partnership illustrates how Alibaba is positioning itself as a key player not just domestically but also in global technology collaboration.

The technological race isn't limited to Alibaba, as the market anticipates a substantial increase in capital expenditures from ByteDance as well, alongside other tech giants such as Tencent and Baidu, all ramping up their investments as the demand for domestic computing power continues to rise.

Market analysis from Kaiyuan Securities underlines that the massive investments from leading companies like ByteDance, Alibaba, and Tencent in AI are poised to benefit the entire domestic AIDC (Artificial Intelligence & Data Center) industry chain–encompassing chips, servers, data center facilities, and related componentsAnalysts suggest that the ongoing upgrades to domestic models and the exceeding expectations in capital expenditure will fuel the sustained demand for domestic computational capabilities, further suggesting attention towards sectors such as IDC, servers, switches, optical modules, and liquid cooling technologies.

Furthermore, Guotai Junan Securities remarked that the verification of Alibaba’s robust capital expenditures presents promising prospects for the advancement of domestic computational investments

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They express a bullish outlook particularly on data centers and server power supply segments, emphasizing potential growth stimulation in these areas.

The shift towards HVDC (High Voltage Direct Current) technology by Chinese enterprises began with communication networks and has subsequently expanded into the data centers of internet giants, revealing a rapid uptick in demandMeanwhile, developments abroad remain in their infancy, with companies like Veeco being poised to provide robust HVDC solutions for data centersAlibaba’s collaborative initiative with Delta to formulate a data center power supply solution epitomizes the strategic moves being deployed to achieve greater efficiency and compactness in operations, thus setting Alibaba at the helm of large-scale deployments.