(Bloomberg) -- Alibaba Group Holding Ltd. is leading a financing round of at least $600 million for Chinese AI startup MiniMax, spearheading its second major deal in the space this year as it unleashes capital in pursuit of growth.

The two-year-old firm has secured funds from Alibaba and other investors at a valuation of more than $2.5 billion, according to people familiar with the matter. The fundraise remains in progress but Alibaba and HongShan, formerly Sequoia China, have committed to the financing, one of the people said, asking not to be identified talking about private discussions. The terms could still change because negotiations with more investors are proceeding, the people added.

Alibaba joins Silicon Valley peers like Microsoft Corp. in placing big bets on generative AI, the technology that powers ChatGPT. It’s the second big deal for the e-commerce pioneer in a burgeoning field, suggesting Alibaba is resuming the rapid pace of investments that, in past years, cemented its leadership and helped propel the rise of names such as Didi Global Inc. New chiefs Joseph Tsai and Eddie Wu, two former deal-makers who took the helm from Daniel Zhang in 2023, are exploring options to turn around a flagging company hammered by two years of regulatory scrutiny. 

On Tuesday, China’s internet overseer published a lengthy opinion piece from Wu — a rare public endorsement for a CEO. In the column, Alibaba’s chief voiced his support for Beijing’s efforts to seize the lead in AI, pledging to invest in the field and outlining his company’s efforts to develop generative artificial intelligence. 

“We’re on the cusp of a new revolution, spanning human-machine interactions, computing models and AI-assisted creation,” Wu, who became CEO in September, wrote on the WeChat account of the Cyberspace Administration of China. “We’re in the process of accelerating new productive forces,” he said, echoing a phrase coined by the government to refer to technological and economic advances.

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Representatives for Alibaba, MiniMax and HongShan didn’t have immediate comment when contacted by Bloomberg News.

Alibaba, which ranked among China’s most prolific tech investors until a government clampdown began in 2020, is again on the hunt for prospects. 

It led a $1 billion funding round in recent months in Moonshot AI, boosting the year-old startup’s valuation also to about $2.5 billion, Bloomberg News reported. The successive deals show Alibaba’s keen to place bets on potential future leaders in artificial intelligence — even if they don’t necessarily dovetail.

MiniMax, founded by veterans of computer-vision specialist SenseTime Group Inc., competes with Moonshot in developing ChatGPT-like services. Alibaba’s backing brings the startup out of relative secrecy and helps establish its credentials alongside more public outfits such as Zhipu and Baichuan. Its existing backers include Tencent Holdings Ltd., IDG Capital and Hillhouse, another person said. 

Xi Jinping’s administration has designated research into cutting-edge fields like AI a priority for coming years, vowing to mobilize an entire nation to try and reduce a reliance on Western technology. AI, which has military as well as commercial applications, is of particular interest to both Beijing and Washington because of its potentially transformative nature.

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Alibaba appears to have gotten off to a quicker start on deal-making in 2024 than rivals Tencent and Baidu Inc., which have also funneled capital into multiple AI startups since ChatGPT ignited a global frenzy.

Tencent previously backed startups including Zhipu and Baichuan together with Alibaba. Baidu, which in 2023 said its chatbot matched GPT in some respects, has also financed fledgling firms but largely focused on developing its in-house Ernie platform.

Apart from investing in AI, Alibaba is also orchestrating a multi-way split intended to spur independent business lines from cloud to logistics.

It’s trying to revive the cloud business and integrate AI and its in-house model — Tongyi Qianwen — across a sprawling business that also spans entertainment. Tsai has said the cloud unit already hosts half of China’s generative AI firms and serves about 80% of the country’s technology companies.

--With assistance from Gao Yuan and Sarah Zheng.

(Updates with existing investors from the ninth paragraph)

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