Alibaba has unveiled its latest AI models, but the real story is a major pivot in its business strategy.
For the first time, Alibaba's most powerful new models, Qwen3.6-Plus and Qwen3.5-Omni, are being kept proprietary—or 'closed-source'—accessible only through its cloud platform's API. This is a significant departure from its previous open-source approach and signals a clear intention to more aggressively monetize its AI developments. This strategic shift isn't happening in a vacuum; it's a direct response to a combination of internal and external pressures.
First, there's the internal push for new revenue. While Alibaba's cloud division is growing impressively (up 36% year-over-year in the last quarter), the company's overall revenue growth has slowed to just 2%. In response, management has set an ambitious five-year goal of reaching $100 billion in combined AI and cloud revenue. To hit this target, simply offering services isn't enough; they need to sell premium, high-margin products, which is exactly what these closed-source models represent.
Second, the competitive landscape in Alibaba's core e-commerce business is getting tougher. The Chinese market is experiencing what's known as 'involution'—a cycle of intense, cut-throat competition that erodes profits. Regulators are also cracking down on extreme promotional tactics, limiting Alibaba's ability to drive growth through its traditional playbook. This makes it crucial to find and grow other profitable business lines, with AI and cloud being the most promising candidates.
Finally, the global AI race is accelerating. Competitors like Google are rapidly advancing with their own multimodal models like Gemini, which can understand and process text, images, and audio in real-time. By keeping its top models proprietary, Alibaba can focus its resources on competing at this highest level while also creating a premium offering that businesses are willing to pay for. The recent price hikes of up to 34% for AI computing services on Alibaba Cloud perfectly align with this strategy, creating a direct path from technological advancement to revenue growth.
- API-only (Closed-Source): A model that is not publicly released. Users can only access its capabilities by paying to use it through a company's service (an Application Programming Interface, or API), but they cannot see or modify the model's underlying code.
- Multimodal AI: Artificial intelligence that can understand and process information from multiple types of data at once, such as text, images, audio, and video. This allows it to handle more complex, real-world tasks.
- Involution: A term used to describe a situation of intense internal competition where participants are stuck in a zero-sum game, working harder and harder for diminishing returns without any real progress or innovation.