Alibaba Fueling China's AI Boom with Moonshot Partnership

Alibaba's cloud division has secured a major AI customer in Chinese startup Moonshot AI. The company has granted Moonshot access to computing capacity equivalent to around 20,000 Nvidia chips, which will support the development and running of large AI systems. This agreement is a significant boost for Alibaba Cloud's position as critical infrastructure for China's AI boom.

The partnership also raises concerns about regulatory scrutiny and potential competition from its customer. Moonshot uses the capacity to train its Kimi models, including K3, which has reportedly outperformed some of Alibaba's own models. This arrangement is unusual, with Alibaba acting as both investor and competitor to Moonshot.

The deal reinforces Alibaba Cloud's improving momentum, with cloud revenue rising 38% in the March quarter to 41.63 billion yuan. AI-related product sales have delivered triple-digit growth for an 11th consecutive quarter, representing 30% of external cloud revenue.