Alibaba Group Holding is recording large unrealised gains from investments in Chinese memory chipmaker CXMT and generative artificial intelligence startups. Its shift from acquiring large retailers to taking minority stakes centred on AI and semiconductors is being seen as delivering results.

According to the Hong Kong-based South China Morning Post on July 28, Alibaba is the largest industrial investor in CXMT, holding about a 5 percent stake in the recently listed Chinese memory chipmaker. The stake is estimated to be worth more than 140 billion yuan.

The biggest payoff has come from the CXMT investment. Alibaba has invested about 7.6 billion yuan in CXMT since 2021. As of the July 28 close, CXMT's market capitalisation has risen to about 3.14 trillion yuan, pushing the value of Alibaba's stake to about 20 times the initial investment.

Alibaba is also a major investor in AI startup Zhipu AI. With valuations rising sharply for both CXMT and Zhipu AI, Alibaba as a common investor in the two companies is set to record substantial paper gains.

The results contrast with its past strategy of large-scale acquisitions. Alibaba bought a controlling stake in Chinese hypermarket operator Sun Art Retail in 2020 for about HK$28 billion, but later recorded more than 25 billion yuan in impairment losses and disposal losses. It eventually sold its entire stake to Chinese private equity firm DCP Capital for HK$13.1 billion at the end of last year.

Alibaba has since shifted its investment strategy while focusing on its core e-commerce business and positioning AI as a future growth engine. Instead of large acquisitions to secure management control, it is expanding minority-stake investments and industrial cooperation across the AI supply chain. Alibaba chairman Joe Tsai (조 차이) presented capital allocation principles in 2023: improving profitability in core businesses, investing for future growth, selling non-core assets and returning value to shareholders.

Alibaba has also acted aggressively as an early investor in China's generative AI market. Between 2023 and 2024, it invested in Zhipu AI as well as Moonshot AI, MiniMax, Baichuan AI and 01.AI.

A leading example is Moonshot AI, which developed Kimi. Alibaba invested about $800 million to secure about a 36 percent stake in Moonshot AI, based on fiscal 2024 disclosures, and also participated in follow-on investments. Moonshot AI is reported to be seeking pre-IPO funding with a target valuation of up to $50 billion.

It is also expanding investments in AI applications and infrastructure. Alibaba has invested in AI video generation companies PixVerse and Vidu, as well as Kuaishou's Kling AI. It invested about $1.36 billion in Kling AI to secure a 1.11 percent stake.

Investments are also continuing in semiconductors and data centres. Alibaba is a key investor in memory interconnect chip designer Montage Technology, photonic computing and optical interconnect company Light Intelligence, and high-speed optical module maker Zhongji Innolight.

While its stakes are not large, these companies supply key components for AI data centres. Alibaba is using the investments to widen its reach across AI infrastructure in line with its "Full-stack AI Provider" strategy.

Robotics is also a key investment area. Alibaba is investing in humanoid companies including LimX Dynamics, Robot Era, Unitree Robotics, Galaxea and X Square Robot, as well as robot-hand maker Linkerbot. It is also investing in physical AI companies including Sudu Technology and Noematrix.

The market sees Alibaba's recent investment strategy as focusing on securing the broader AI industry ecosystem spanning AI models, semiconductors, optical communications and robotics, rather than acquiring consumer internet companies. CXMT's listing and rising valuations for AI startups are cited as examples showing the strategy shift is also translating into financial results.