Alibaba: From Beijing’s Crosshairs to AI Powerhouse

In a dramatic turn of events on a November evening in Shanghai back in 2020, Chinese regulators abruptly called off what was poised to be the world’s largest IPO. The company in question was Ant Group, the fintech arm of the tech behemoth, Alibaba. The scrutiny stemmed from comments made by Alibaba’s founder, the celebrated billionaire Jack Ma, which appeared critical of the country’s financial regulatory apparatus. This marked the beginning of a turbulent period for Ma’s sprawling empire.

The fallout from the IPO cancellation has been substantial, erasing over $400 billion from Alibaba’s market capitalization, even after accounting for a recent rebound. In the aftermath of the failed public listing, Ma retreated from the public sphere. Alibaba, once the undisputed king of Chinese e-commerce, seemed to falter. Restructuring efforts and leadership changes yielded limited positive outcomes, a departure from the company’s historical resilience and dominant market position.

However, those familiar with Ma’s tenacity know that he should never be underestimated.

“The hallmark of Jack and his personality is that he never gave up,” Brian Wong, a former Alibaba executive and author of “The Tao of Alibaba,” told CNBC.

Wong is featured in the new show “Built for Billions,” which explores Alibaba’s most challenging moments and its journey to becoming a global tech titan and a prominent player in artificial intelligence.

Having covered the tech landscape for over a decade, with a significant focus on China, I spent three years immersed in the world’s second-largest economy from October 2018 to December 2021, a period coinciding with Alibaba’s profound transformation. From its inception in 1999 as a B2B online marketplace during the early days of the internet, Alibaba’s impact is undeniable.

Today, Alibaba’s reach extends to various sectors, including food delivery, global e-commerce, cloud computing, and artificial intelligence. The company’s brand and scale are on full display during Singles Day, an annual shopping extravaganza pioneered by Alibaba, featuring substantial discounts across its platforms. What began as a single day of deals has evolved into an extended shopping event spanning several weeks.

I have witnessed Alibaba’s Singles Day firsthand in both Shanghai, with its grand gala featuring celebrities and musical performances, and at its Hangzhou headquarters. The entire company mobilizes, processing billions of dollars in transactions in a short timeframe. These experiences provided invaluable insights into the sheer magnitude of Alibaba’s operations.

Alibaba is often compared to Amazon, but that’s an oversimplification. While both companies have a strong e-commerce presence, their business models and strategic focuses differ significantly. Alibaba’s initial focus on being a platform for other businesses remains a core aspect of its identity, even as it expands into other sectors.

“Alibaba now, is seen as a serious player in technology, not just an e-commerce company,” Duncan Clark, an early advisor to Alibaba and chairman of consultancy firm BDA China, told CNBC’s “Built for Billions.”

The cancellation of the Ant Group IPO triggered a broader reckoning for Alibaba and the entire Chinese tech sector. Beijing initiated a regulatory crackdown on domestic tech firms, tightening regulations across the board. This move was partly driven by concerns about the increasing power and influence wielded by the country’s tech entrepreneurs.

Ma’s empire faced stricter regulations, culminating in a hefty $3 billion antitrust fine in 2021. Internally, Alibaba underwent a period of intense self-reflection, grappling with a more challenging domestic market, weakened consumer sentiment, and growing competition from rivals like PDD and JD.com. The question was how to reignite growth. And whether Jack Ma would remain a relevant force in the company.

Even after leaving China in 2021, it became clear that international markets paid close attention to Ma. His public appearances often triggered significant stock price movements for Alibaba, underscoring his continued influence and symbolic importance.

This focus on Ma’s activities, however, obscured the significant transformation occurring within Alibaba. The company underwent a major restructuring, but the impact on its overall performance remained limited. Daniel Zhang, who succeeded Ma as CEO and chairman, unexpectedly announced his plans to step down in 2023. He was replaced by two seasoned veterans, CEO Eddie Wu and President Joe Tsai who have since sought to stabilize the company. Their strategy is a renewed focus on core e-commerce while simultaneously investing heavily in AI. Recent quarters show a sharp improvement in business and profitability.

So, was Ma gone for good? Apparently not. In February, Ma was among a select group of entrepreneurs who engaged in a rare meeting with Chinese President Xi Jinping.

“He’s in his early 60s now, but he’s still pretty vibrant. He has homes and yachts and all that stuff. But one senses that he’s not done yet,” Clark said.

Amid the pressure and subsequent revival, Alibaba has been strategically investing in artificial intelligence. In fact, this has been a core initiative since 2016. Alibaba’s approach to AI is increasingly setting it apart from other tech giants.

“Acceleration happened, really during … the covid years 2019, 2021 when they really started to build their own foundational models and their own chips,” Mark Greeven, professor of management innovation at the International Institute for Management Development told “Built for Billions.”

When OpenAI’s ChatGPT burst onto the scene in late 2022, Alibaba was poised to respond within months, unveiling its own AI offerings. This rapid response showcased the investments the firm had poured into AI infrastructure as well as talent.

Alibaba’s approach to AI differs from many of its U.S. counterparts. The company is focusing on open-source or open-weight AI models, which developers can freely download and utilize. This strategy not only fosters innovation with their products but also positions Alibaba as a champion of accessible AI development. Their models are rising in popularity and in some applications outperforming US models.

CEO Wu has solidified Alibaba’s commitment to reinventing itself as an AI-driven company. In his inaugural letter to employees, Wu called for Alibaba to embrace a startup mentality and prioritize two strategic objectives: “user first” and “AI-driven.”

This emphasis on AI has positively impacted the company’s cloud business. It also positions Alibaba as a prominent player in the unfolding AI race between U.S. and Chinese companies.

“Wherever you look, whatever you touch, China is moving closer towards that vision of dominating AI race by 2030, Alibaba is participating and being an important player,” Ashley Dudarenok, a China digital expert and investor told “Built for Billions.”