Alibaba Group (BABA) Stock: $52.4 Billion Bet On AI Future

TLDR

• Alibaba released a new AI model called R1-Omni that can read emotions from visual cues
• The company also upgraded its Quark AI assistant with advanced reasoning capabilities
• Alibaba is partnering with Apple to bring AI features to iPhones in China, pending regulatory approval
• Alibaba plans to invest $52.4 billion in cloud computing and AI over the next three years
• Chinese AI competition is heating up with startups like DeepSeek claiming to rival Western AI at lower costs

Alibaba Group has unveiled a new artificial intelligence model capable of reading human emotions, marking a major step in the company’s AI development strategy. The model, called R1-Omni, can detect emotional states like “happy” or “angry” from visual cues in videos.

Researchers from Alibaba’s Tongyi Lab demonstrated the open-source R1-Omni model in action. The technology can analyze a person’s emotional state while simultaneously describing their clothing and surroundings.

This new model builds upon HumanOmni, another open-source project led by researcher Jiaxing Zhao. Unlike some competitors’ offerings, Alibaba is making R1-Omni available for free download on Hugging Face.

The emotion-reading AI represents part of Alibaba’s broader push into artificial intelligence. CEO Eddie Wu told analysts in February that artificial general intelligence has become the company’s “primary objective.”

Emotional intelligence technology has wide-ranging applications. Such tools are already being used to help customer service chatbots detect customer frustration and in Tesla vehicles to identify drowsy drivers.

In a separate announcement, Alibaba revealed an upgrade to its Quark AI assistant. The revamped assistant now features enhanced reasoning capabilities that allow users to ask more complex questions.

The upgraded Quark offers advanced features including AI chatbot functionality, deep thinking, research capabilities, and task execution through an improved user interface. Alibaba is rolling out the upgraded assistant gradually, beginning with a pilot launched on Thursday.

These AI developments come as Alibaba awaits regulatory approval for its partnership with Apple. The collaboration would bring Apple Intelligence features to iPhones sold in mainland China.

The Apple partnership could prove mutually beneficial. Apple has seen iPhone shipments in China fall by 17% to 42.9 million units in 2024, according to research firm Canalys.

China AI Sector

Alibaba’s AI advancements come amid increased competition in China’s artificial intelligence sector. Chinese startup DeepSeek made headlines earlier this year by claiming to have developed AI models comparable to Western counterparts at much lower costs.

Another Chinese startup recently launched Manus AI, a “general” AI agent reportedly capable of autonomously performing tasks like data analysis. The technology is currently in testing with invited users.

To maintain its competitive position, Alibaba has committed substantial resources to AI development. The company recently announced plans to invest at least 380 billion yuan ($52.4 billion) in cloud computing and AI over the next three years.

The market has responded positively to Alibaba’s AI strategy. While its American depositary receipts were down 0.4% following the announcement, they have gained 62% this year through Wednesday’s close.

Financial publication Barron’s named Alibaba a stock pick for 2025. The outlet noted the potential for the company’s relatively low valuation to increase if investor sentiment toward the Chinese market improves.

Alibaba’s focus on open-source AI models contrasts with some competitors’ approaches. OpenAI’s recently released GPT-4.5 model, which also claims improved ability to identify and respond to subtle user cues, is only available to users paying $200 monthly.

This strategy aligns with Alibaba’s position in the competitive Chinese market, where the company is engaged in an ongoing price war for customers.