Alibaba Is Joining the AI Race. It’s Developing a ChatGPT Rival.

 Alibaba is the latest tech giant to wade into artificial intelligence chatbots by developing a tool like ChatGPT.

It joins Microsoft, Google, and Baidu in doing so amid heightened interest in generative AI technology in 2023.

Investors in Alibaba (ticker: BABA) may be cheering the Chinese tech giant’s decision to develop a public-facing AI chatbot, with shares in the group jumping 2% in U.S. premarket trading.

Alibaba has developed and is currently putting a ChatGPT-style tool through internal testing, the company said Wednesday.

“Frontier innovations such as large language models and generative AI have been our focused areas since the formation of DAMO [investment for research & development] in 2017,” an Alibaba spokesperson said. “As a technology leader, we will continue to invest in turning cutting-edge innovations into value-added applications for our customers as well as their end-users through cloud services.”

DAMO is Alibaba’s “Academy for Discovery, Adventure, Momentum and Outlook,” launched in 2017 with the goal of investing more than $15 billion in research and development across the next three years. Like Baidu, Alibaba is a legacy Chinese tech giant that is increasingly pivoting to high-growth areas that are exposed to AI. At its core an e-commerce company, Alibaba has a booming cloud computing business, which is a segment of the group that is leading its high-tech push.

Investors—and the public at large—have been captivated by generative AI since the widely popular launch late last year of OpenAI’s ChatGPT tool. The natural language chatbot surpassed 100 million monthly active users in January, according to analysis by UBS, which would make its adoption one of the fastest-growing consumer technologies in history.

ChatGPT’s fast success has seemed to spur an AI arms race, with Microsoft (MSFT), which backed open AI, looking to use it to shake up the web search market. Google parent Alphabet (GOOGL) and Chinese tech giant Baidu (BIDU) have also recently announced plans to launch their own chatbots soon.

Alibaba’s stock pop on Wednesday—likely helped by the AI news—is indicative of an investor frenzy over chatbots that shows few immediate signs of stopping, with even the speculative world of cryptocurrencies following suit in its own way.

While AI does represent an attractive area for growth, investors would do well to take heed as this wave of optimism gets closer and closer to bubble territory.

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