It was supposed to be a good week for Alibaba Group Holding Ltd (阿里巴巴). The tech giant released its revamped Qwen app to users in China, with plans to roll out the ChatGPT-like tool internationally later on.
The company’s family of artificial intelligence (AI) models have proven extremely popular with global developers, but the release of the all-in-one app signaled its boldest push yet into the consumer market. The new Qwen platform goes beyond conversational AI, the company said, and can generate a full research report or produce a PowerPoint presentation in seconds. For now, Alibaba is offering it up for free — a move that could potentially pose a threat to Silicon Valley leader OpenAI, which reportedly earns 70 percent of its annual revenue from consumers using ChatGPT.
However, that news was largely overshadowed by a Financial Times report alleging Alibaba provides tech support for Chinese military operations, according to a White House memo that was shared with the news outlet. The company has strongly denied the claims as completely false and questioned the motivation behind the anonymous leak.
The “malicious PR operation clearly came from a rogue voice looking to undermine [US] President [Donald] Trump’s recent trade deal with China,” the Hangzhou-based company said.
Washington has long tried to limit China’s influence on key technologies, a push that has ensnared firms from Huawei Technologies Co (華為) to TikTok. History suggests Beijing would not sit idly by if it feels its corporate champions are under attack.
It has been radio silence from the White House since the report, and the US notably stopped short of more aggressive actions, such as sanctions or adding the firm to a trade blacklist. However, it shows that Alibaba’s rise as an AI leader in China is not going unnoticed, and it is a fair bet Washington’s scrutiny will only grow. The question now is if the skepticism sowed by the Trump administration would be enough to spook investors — or turn global developers and consumers away from its products.
Alibaba shares initially slumped after the report, before paring back some losses over the week. Citigroup Inc analysts suggested investors buy the dip, writing that the company would not risk anything that could jeopardize its reputation or fiduciary duty to shareholders. That might be true, but the damage to investor confidence in Chinese tech could still linger.
US consumers have shown they are still willing to use China-originated apps, despite perceived national security concerns: Just look at TikTok. It has not been spared from a law requiring it to divest from its Beijing parent company or face a US ban, even if Trump has delayed the deadline for the sale multiple times. It remains unclear if Qwen has what it takes to seriously compete with ChatGPT, but its rising popularity could put a target on its back.
Meanwhile, developers have embraced Alibaba’s family of open-source Qwen models. Cumulative downloads overtook Meta Platforms Inc’s Llama earlier this year, data from Hugging Face compiled by the ATOM Project showed. Even before news of the app, a “Qwen panic” was causing consternation, as more global firms were choosing to build on its systems over US alternatives.
The Financial Times said it could not independently verify the claims against Alibaba in the White House memo, but it pointed out that a handful of US tech giants — from Amazon.com Inc. to Microsoft Corp — work with the Pentagon.
Globally, militaries and consumer tech companies are becoming increasingly linked. The rise of AI in particular raises fears because of its potential for dual-use applications, worries that have been the genesis of many of Washington’s tech clampdowns. Still, the optics of Chinese tech firms doing the same are unlikely to play well in Washington.
“China hawks have been sidelined in recent months, which may be one reason for the leak to the press,” said Michael Hirson, the head of China research at New York-based 22V Research.
Some US lawmakers have already used the allegations to call for harsher penalties, such as delisting from US stock exchanges. However, a fresh US offensive against Alibaba would backfire. After a fraught trade truce between Washington and Beijing was reached last month, targeting the Chinese firm could prompt a new round of tensions.
Alibaba’s AI ambitions would not easily escape the geopolitical crossfire, but instead of undermining rivals, the US would be wise to focus on making its own offerings more attractive for businesses and consumers.
Catherine Thorbecke is a Bloomberg Opinion columnist covering Asia tech. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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