Alibaba rides wave as China sharply expands AI spending | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

The wind is coming in hard from the East, folks, and it’s packing a lot of cash.

Every other week, it seems, somebody’s dropping a report about spending on artificial intelligence.

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Gartner recently issued a study that said worldwide spending on AI is forecast to total nearly $1.5 trillion this year.

“The forecast assumes continued investment in AI infrastructure expansion, as major hyperscalers continue to increase investments in data centers with AI-optimized hardware and GPUs to scale their services,” John-David Lovelock, vice president and analyst at Gartner, said in a statement.

“The AI investment landscape is also expanding beyond traditional U.S. tech giants, including Chinese companies and new AI cloud providers,” he added. “Furthermore, venture capital investment in AI providers is providing additional tailwinds for AI spending.”

China is becoming a world leader in AI because of government support and its focus on computing efficiency, Morgan Stanley Research said in a May 22 report.

Veteran trader: AI spending keeps coming

China’s core AI industry may become a market valued at $140 billion by 2030, the firm said. That estimate jumps 10 times to $1.4 trillion when related sectors, such as infrastructure and component suppliers, are included.

“China has been methodically executing a long-term strategy to establish its domestic AI capabilities,” Shawn Kim, Morgan Stanley’s head of technology research in Asia, said in a statement.

“The nation’s robust academic foundations, innovative methodologies, data, talent and increasing foreign investment are propelling it toward becoming a leading AI powerhouse.”

In the next five years, China aims to achieve full independence from foreign countries in its AI development, Morgan Stanley said. Hampered by U.S. export restrictions, the nation is prioritizing more efficient and less expensive AI technologies.

TheStreet Pro’s James “Rev Shark” DePorre says some bears have been scoffing at the huge amount of AI spending.

“In particular, the deal between Nvidia and OpenAI, in which Nvidia is making an equity investment in OpenAI and OpenAI is using the funds to buy more AI chips from Nvidia,” the veteran trader said, citing the company behind the ChatGPT AI chatbot.

“This vendor financing isn’t anything new, but it looks overly aggressive to the folks who are trying to call the AI industry a bubble.”

Despite the negative remarks, AI spending keeps coming, DePorre noted, citing Chinese tech giant Alibaba (BABA) . The company jumped 9% after saying it would spend $53 billion on AI, while Micron (MU) reported a 46% jump in revenue due to AI spending.

“My best advice is to focus more on the action in individual stocks and not worry too much about the indexes,” he added.

And speaking of Alibaba, the company said it was integrating an Nvidia (NVDA) suite of AI development tools for so-called physical artificial intelligence into its cloud software platform, a reference to advanced systems, such as robots and self-driving cars, Bloomberg reported.

Analysts sees Alibaba as world-class AI leader

The Hangzhou-based company’s Cloud Intelligence unit will offer customers the option to employ Nvidia’s tools in building AI for the physical world, spanning everything from humanoid robots to self-driving cars.

It’s a notable collaboration, bringing together the world’s most valuable company with one of China’s top cloud computing and service providers, Bloomberg said.

Alibaba Cloud’s Platform for AI will include the full Nvidia Physical AI software stack among its menu of options for developers, the company said at its annual Apsara developer conference in Hangzhou on Wednesday.

The announcement came shortly after CEO Eddie Wu unveiled plans to boost Alibaba’s investment in AI infrastructure from the previously announced 380 billion yuan ($53 billion).

“We are vigorously advancing a three-year, 380 billion [yuan] AI infrastructure initiative with plans to sustain and further increase our investment according to our strategic vision in anticipation of the [artificial superintelligence] era,” Wu said, according to CNBC.

He did not disclose the additional budget for AI infrastructure spending.

Wu also disclosed the company’s biggest-ever overseas investment in AI infrastructure. It plans to launch the company’s first data centers in Brazil, France and the Netherlands, with additional centers to be added in Malaysia, Dubai, Mexico, Japan and South Korea in the coming year.

Alibaba shares climbed after the announcement. The stock has more than doubled (up 110%) this year and are up nearly 97% from this time in 2024.

Bank of America raised its price target on Alibaba to $195 from $168 and affirmed a buy rating on the shares after the Apsara conference, according to The Fly.

The investment firm says the company is positioned as the world’s leading full-stack artificial intelligence services provider. Alibaba is increasing investment to embrace the era of artificial superintelligence, the firm said.

Superintelligence has been defined as a hypothetical form of intellect that would vastly surpass the best human minds across virtually all intellectual domains, such as problem-solving, scientific creativity, and general wisdom.

While some people have heralded this next-level AI, others are worried about a potential loss of human control.