German Chancellor Friedrich Merz’s tour of humanoid robots at Unitree Robotics in Hangzhou, complete with demonstrations of machines dancing and sparring, underscored a pivotal moment in global tech diplomacy. On Thursday, Merz lunched with Alibaba CEO Eddie Wu Yongming and Unitree founder Wang Xingxing, capping his first official China visit by engaging 10 firms specializing in AI, robotics, and electric vehicles—including Rokid’s AI glasses and EV makers Geely and Leapmotor. German Chancellor’s Hangzhou tech tour highlights China’s AI robotics push. Wang hailed the encounter as an “honour,” eyeing “collaborating with global enterprises for mutual success,” signaling China’s tech hubs drawing Western leaders despite trade frictions.
This visit arrives as Alibaba accelerates its AI pivot, with its Qwen 3.5 models rivaling U.S. frontrunners like OpenAI’s GPT-5-mini and Anthropic’s Claude Sonnet 4.5 on benchmarks for knowledge and visual reasoning, all at a fraction of the compute cost. Alibaba’s Qwen 3.5 challenges top U.S. LLMs with efficiency. Investors shrugged off a recent earnings miss, propelling shares up 12.9% in New York to $135, fueled by triple-digit AI product growth and Alibaba Cloud’s 26% revenue surge to 33.4 billion yuan. These threads weave a narrative of Alibaba transcending e-commerce battles toward AI dominance, bolstering China’s self-reliance amid U.S. export curbs, while courting international partnerships.
Diplomatic Spotlight on Hangzhou’s AI Ecosystem
Merz’s Hangzhou stoplight reflects Europe’s pragmatic outreach to China’s digital engines, even as U.S.-China chip wars intensify. Beyond photo ops, Merz donned Rokid’s AI glasses, voicing “strong interest and appreciation,” per the startup. This isn’t mere symbolism: Germany’s auto giants like BMW—already partnering with Alibaba on large language models for vehicles—face pressure to diversify AI suppliers beyond Nvidia, whose H200 chips remain mired in Beijing’s regulatory haze. Analysts see Merz’s itinerary strengthening his leverage ahead of a March Trump summit, positioning Germany to balance transatlantic ties with Asian supply chains.
For China’s tech sector, the visit validates Hangzhou as a robotics and AI nexus. Unitree’s humanoids, showcased in martial arts feats via CCTV, exemplify hardware-software synergy with Alibaba’s models. Yet implications ripple globally: Western firms risk falling behind if they shun such ecosystems, while China gains validation for its “tech self-reliance” drive. Unitree CEO Wang’s global collaboration pledge hints at joint ventures, potentially easing EU scrutiny on subsidies. This diplomatic thaw could accelerate cross-border AI standards, but hinges on navigating data sovereignty and IP tensions. Merz engages Alibaba, Unitree in Hangzhou.
AI Fuels Cloud Surge Amid E-Commerce Drag
Alibaba’s latest quarter epitomized its bifurcation: total revenue rose 2% to 247.65 billion yuan ($34.6 billion), missing estimates, with operating profit dipping 3% to 35 billion yuan. China e-commerce, including Taobao and the cash-bleeding food delivery skirmish against Meituan and JD.com, grew 10% to 140 billion yuan but saw EBITDA plunge 21% from subsidies. CEO Eddie Wu acknowledged the “heavy toll,” yet framed AI as the “clear path for robust growth.” Alibaba earnings spotlight AI over delivery wars.
Alibaba Cloud’s 26% jump to 33.4 billion yuan—trouncing 18% forecasts—stole the show, driven by AI inference and training demands. Triple-digit AI product revenue underscores Qwen’s enterprise traction. Jefferies analysts noted “accelerating growth on rising AI adoption,” with enhanced modeling. Business-wise, this offsets quick-commerce losses, where billions in subsidies erode margins. For cloud rivals like AWS or Azure, Alibaba’s cost edge in Asia threatens market share, especially as enterprises prioritize hybrid inference. Long-term, sustained AI capex could flip profitability, but execution risks loom if delivery wars escalate.
Qwen 3.5’s Benchmark Breakthroughs Redefine Open AI
Alibaba Cloud’s Qwen 3.5 series—encompassing Flash, 35B-A3B, 122B-A10B, and 27B models—delivers near-peer performance to U.S. leaders on efficiency metrics. The 35B variant outpaces its 235B predecessor via superior architecture, data curation, and reinforcement learning, handling 1 million-token contexts on 32GB consumer GPUs with 4-bit quantization. All accept text, images, and video; outputs text under Apache 2.0 for commercial use. Hosted Flash API pricing: $0.10/million input tokens, $0.40 output—slashing barriers for developers. Qwen 3.5 rivals GPT-5-mini at low cost.
“Thinking Mode” enables internal reasoning before responses, boosting agentic tasks; tool-calling suits enterprise workflows. Benchmarks show parity in visual reasoning, closing gaps in complex scenarios. Technically, hybrid Gated Delta + MoE architecture optimizes inference, vital for edge deployment. Implications? Democratizes high-end AI for SMEs, eroding Nvidia/OpenAI moats in China and beyond. Open-sourcing fosters ecosystems, akin to Llama’s impact, but with multimodal prowess. For global devs, Qwen offers a viable U.S. alternative amid export bans.
Hardware Alliances Accelerate Self-Reliance
Moore Threads’ MTT S5000 GPU now supports full-stack Qwen 3.5 integration, from 35B-A3B to 122B-A10B, amid Beijing’s push to supplant Nvidia. Founded by ex-Nvidia exec Zhang Jianzhong, Moore Threads joins MetaX and Biren in a GPU arms race. This compatibility, announced post-Qwen 3.5 launch, enables domestic training/inference without U.S. silicon. Moore Threads MTT S5000 pairs with Qwen 3.5.
Enterprise tech shifts: Chinese hyperscalers like Alibaba can scale AI sans import roulette, where Nvidia’s H200 entry remains uncertain. MTT S5000’s efficiency suits datacenter MoE models, potentially halving costs versus A100 equivalents. Broader canvas: Fuels “indigenous innovation,” insulating against tariffs, while pressuring Western chipmakers to innovate. Partnerships like BMW’s LLM integration for autos exemplify verticals ripe for localized stacks, blending Alibaba Cloud with domestic hardware.
Developer Tools and Partnerships Reshape Cloud Narrative
Alibaba’s multi-model AI coding subscription bundles Qwen 3.5 with startup LLMs, enabling seamless switching for devs—sticky, cost-effective for enterprises. BMW collaboration applies models to automotive services, from connected cars to predictive maintenance. AI coding plan and BMW tie-up boost cloud. These extend beyond e-commerce, targeting software dev and Industry 4.0.
Analytically, bundling commoditizes access, mirroring AWS Bedrock but Asia-optimized. BMW’s scale tests real-world ROI, potentially unlocking fleet-scale inference. Valuation-wise, at $153 (44.6% below fair value per Simply Wall St), AI disclosures could rerate multiples from 18.8x P/E. Versus Baidu, Alibaba’s e-com base offers diversification, clearer AI monetization paths. Alibaba vs. Baidu stock showdown.
Investor buzz peaks: Zacks notes stable estimates ($1.91 Q EPS, -34.8% YoY), with FY27 rebound to $8.72 (+46.4%). Alibaba draws investor scrutiny. Undervaluation at 29-40% below targets signals upside if AI revenue materializes.
Alibaba’s maneuvers coalesce into a resilient AI fortress: cloud momentum counters e-com volatility, open models lure devs, hardware pacts defy sanctions, and global overtures like Merz’s visit broaden horizons. This positions China not as isolated, but integral to enterprise AI pipelines—challenging U.S. hegemony with efficiency over scale. Cloud peers must match pricing aggression; autos and robotics signal trillion-dollar adjacencies.
Looking ahead, Qwen’s evolution and ecosystem lock-in could propel Alibaba Cloud past 30% growth, narrowing the valuation chasm. As Merz’s engagements hint, hybrid global-domestic stacks may redefine supply chains. Will Alibaba’s open-source gambit spark a multipolar AI era, or ignite fiercer IP battles? The race intensifies.
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