Alibaba’s cloud division in talks to raise up to $3 billion from state-owned firms, reports

Just weeks after introducing Tongyi Wanxiangm, an AI image-generation tool in direct competition with OpenAI’s DALL-E and Midjourney, Alibaba Group Holding’s Cloud Intelligence Unit is reportedly in talks to raise private funding from Chinese state-owned enterprises, Bloomberg reported on Monday. The news comes as the Alibaba unit prepares for its upcoming market debut in Hong Kong.

According to the report, the tech giant is reportedly collaborating with advisors to explore a potential fundraising endeavor for its Cloud Intelligence unit, which could secure approximately 10-20 billion yuan ($1.38-$2.75 billion), Bloomberg said, citing sources familiar with the matter.

“The tech giant is working with advisers on a potential Cloud Intelligence Unit fundraising that could raise about 10 billion yuan to 20 billion yuan ($1.4 billion to $2.8 billion), according to the people. Prospective investors include state-backed telecommunication companies,” Bloomberg reported.

The report further suggests that potential investors in this venture could include state-backed telecommunications firms. It’s important to note that these discussions are in their initial stages, and specifics regarding the funding, including the size and timing, remain subject to potential alterations. Alibaba opted not to provide comment on the report.

Earlier this year, Alibaba unveiled its intention to reorganize into six distinct units, a strategic move coming in the wake of a two-year regulatory tightening within China’s tech industry.

As part of this restructuring, Alibaba greenlit a comprehensive spinoff of the Cloud Intelligence Group, intending to execute this separation by issuing stock dividends to its shareholders. The objective is to finalize the public listing of this entity within the coming year.

In a parallel development, Ant Group, which originally emerged from Alibaba’s fold 12 years ago, took market observers by surprise in July by initiating a share buyback initiative. This move pegged the valuation of the fintech giant at $78.54 billion, a considerable departure from the previously touted $315 billion valuation associated with its abandoned public listing attempt in 2020.

In March 2023, Alibaba Cloud underwent a significant restructuring, dividing itself into six major units. This move came as China aimed to alleviate the impact of stringent regulatory measures and support its private enterprises. As part of this transformation, Alibaba launched Tongyi Qianwen, a text generator similar to OpenAI’s ChatGPT.

Then in July, the unit launched Tongyi Wanxiang, an AI image-generation tool that competes with OpenAI’s DALL-E & Midjourney. Tongyi Wanxiang, launched by Alibaba’s cloud division, allows users to input text prompts in either Chinese or English, and the AI tool generates corresponding images in various styles, such as sketches or 3D cartoons. Currently, the tool is available for beta testing exclusively to enterprise customers in China.