Alibaba Shares Surge on Apple AI Partnership in China

Alibaba Group Holding Limited (NYSE: BABA) shares climbed on Tuesday, February 11, 2025, following a report that the company has partnered with Apple Inc. (NASDAQ: AAPL) to bring AI features to iPhones in China. The partnership, which has been in the works for some time, is expected to be a critical catalyst for Apple's competitive standing in the Chinese market.

The Information, a paywalled publication, reported that Apple has struck a deal with Alibaba to develop AI features for iPhones in China. The partnership comes after Apple's previous attempts to launch AI features in the country were hindered by regulatory restrictions. Apple had initially selected Baidu as its main partner, but the Chinese company's progress in developing models for Apple Intelligence fell short of Apple's standards. After that, Apple considered models developed by Tencent, TikTok-parent ByteDance, Alibaba, and DeepSeek, but it passed on DeepSeek as the startup's team lacked the manpower and experience needed to support a large customer.

The partnership between Apple and Alibaba is expected to bring a significant driver of iPhone upgrades to the Chinese market, where Apple's sales have struggled. CEO Tim Cook said Apple saw record iPhone upgrades in its fiscal first-quarter, with stronger sales in markets where Apple Intelligence is available. However, the AI features have been unavailable in China since their October launch, hitting Apple during the key holiday sales season. Greater China was the only region where Apple's first-quarter sales declined year-over-year, and iPhone sales in the country missed analysts' expectations.

Morgan Stanley analysts told clients Tuesday the reported Alibaba partnership would be "a critical catalyst for Apple’s competitive standing in China," and suggested it could solve Apple's iPhone sales slump in the country. JPMorgan also said the move supports "bull case expectations" leading up to the company's expected launch of the iPhone 17 this fall.

Apple shares rose more than 2% Tuesday, and U.S.-listed shares of Alibaba gained 1% on the news. The partnership is expected to bring a significant driver of iPhone upgrades to the Chinese market, where Apple's sales have struggled. The deal, which leverages Alibaba's Qwen AI model, could boost iPhone sales in China and solidify Alibaba's position as a leading AI player.



The partnership between Apple and Alibaba is a significant development in the AI market in China, as it allows Apple to bring its AI features to the Chinese market, which has been a challenge due to regulatory restrictions. This partnership is expected to be a critical catalyst for Apple's competitive standing in China, as it could solve Apple's iPhone sales slump in the country. By partnering with Alibaba, Apple gains access to Alibaba's vast troves of personal data on users' shopping and payment habits, which can help train models and deliver more customized services.



The partnership between Apple and Alibaba is expected to have a significant impact on the competitive landscape of the AI market in China, particularly with regards to other domestic rivals like Huawei and Baidu. Huawei has been gaining momentum in the Chinese market, with sales surging 42% in the third quarter of 2023. The company's recent Mate 70 series features AI capabilities powered by its own home-grown large language model. However, Apple's partnership with Alibaba could provide a strong counterbalance to Huawei's growing influence in the AI market.

Baidu, another major player in the AI market in China, was initially considered as a potential partner for Apple. However, Apple passed on Baidu's models due to concerns about Baidu's poor performance on AI. This decision could impact Baidu's competitive position in the AI market, as Apple's partnership with Alibaba could lead to more customized and advanced AI features for iPhone users in China.

In summary, the partnership between Alibaba and Apple is expected to have a significant impact on the competitive landscape of the AI market in China. By gaining access to Alibaba's data and resources, Apple can bring its AI features to the Chinese market and potentially challenge the growing influence of domestic rivals like Huawei and Baidu.