Alibaba Group(NYSE: BABA) has spent the past few years navigating regulatory crackdowns, macro uncertainty in China, and intensifying competition. However, behind the scenes, a massive transformation is underway as the tech giant repositions itself as an artificial intelligence (AI)-native company.\n\nFor investors, this pivot could mark a turning point. While the headlines still focus on sluggish consumer sentiment and slow e-commerce growth, its AI strategy may be the most important long-term story. Let's break down the three strategic bets Alibaba is making in AI and why they matter.\n\nBuilding a foundational, open-source AI engine with Qwen\nAlibaba's most important AI initiative is Qwen -- a family of large language models that rivals the capabilities of OpenAI's GPT-4, Meta Platforms' Llama, and Alphabet's Google Gemini. The tech giant's seriousness in this area is evident in the ongoing releases of new and better versions of Qwen.\n\nThe latest version, Qwen3, boasts up to 235 billion parameters and has deep multilingual capabilities (119 languages). This latest version compares favorably to the best models from competitors like OpenAI, Deepseek, and Gemini, achieving competitive results in benchmark evaluations of coding, math, and general capabilities. In other words, Alibaba's LLM is as competitive (if not better) than some of the best globally.\n\nUnlike closed models from U.S. tech giants, Alibaba is betting big on open AI -- enabling researchers, start-ups, and governments to use and fine-tune Qwen models freely. This approach is not just technically bold but also strategically smart. It enables Alibaba to drive early adoption globally, particularly in Asia and emerging markets where U.S.-based models are less prevalent. As adoption grows, Qwen and Alibaba's tech ecosystem will become the de facto platform that future AI companies rely on.\n\nIn other words, Qwen could become the engine powering a new ecosystem of Alibaba-backed AI apps and infrastructure.\n\nAlibaba Cloud pivots from infrastructure to AI platform\nFor years, Alibaba Cloud was viewed as a regional infrastructure provider, dominant in China but lagging behind global peers in profitability and product sophistication. But that's changing.\n\nThe company is now rebuilding its cloud around AI, offering a tightly integrated platform that combines compute, application programming interfaces (APIs), developer tools, and its proprietary Qwen models. For instance, with Model Studio, developers can leverage its LLM to build generative AI applications.\n\nThis vertical integration is essential, as it moves Alibaba Cloud up the value chain -- from basic hosting to full-stack AI enablement. This move unlocks new customers and expands wallet share among existing ones. Strategically, this also leads to deeper customer lock-in due to higher switching costs.\n\nBesides, since Qwen is an open-source platform globally, Alibaba has positioned itself well to grow its presence beyond China, particularly in regions where Amazon Web Services (AWS) and Microsoft Azure are not dominant players. In other words, the shift to AI-native infrastructure could be the key to Alibaba Cloud's long-term growth and expansion.\n\nReinventing commerce with AI\nAt its core, Alibaba remains a commerce company, but even here, AI plays a central role. Across platforms like Taobao and Tmall, the company is embedding generative AI to perform various tasks for merchants and consumers.\n\nFor merchants, AI can help improve productivity and sales by automating tasks such as product listings, generating marketing content, and providing customer service. For consumers, AI facilitates personalized recommendations and intelligent search.\n\nInternally, AI also helps improve productivity and efficiency, especially in areas such as warehousing, fulfillment, and logistics. By fully integrating AI into commerce, Alibaba aims to reinvent itself as it fends off competitors such as Pinduoduo and Douyin.\n\nIf done correctly, AI can help Alibaba enhance customer delight and increase operational efficiencies, laying the foundation for its next phase of expansion.\n\nWhat does this mean for investors?\nWhile the market remains fixated on China risk and e-commerce fatigue, Alibaba is quietly rebuilding its future around AI. From Qwen to cloud to commerce, it's laying the groundwork for a more intelligent, scalable, and global business.\n\nThe movement toward AI is not a short-term catalyst -- it's a long-term transformation. But if Alibaba executes, investors may look back and see this as the moment it rewrote its growth story. It's a company worth watching.

Alibaba's AI Ambitions: 3 Strategic Bets Investors Should Watch Closely

Alibaba Group is repositioning itself as an AI-native company through three strategic bets: developing Qwen, an open-source AI engine; pivoting Alibaba Cloud to an AI platform; and integrating AI into commerce platforms like Taobao and Tmall. These moves aim to position Alibaba for long-term growth amid regulatory challenges and competition.