Alibaba Upgrades Full-Stack AI, Joins NVIDIA to Develop Physical AI

September 24, 2025, at the Apsara Conference 2025, Alibaba announced a strategic collaboration with NVIDIA. Alibaba Cloud’s AI platform, PAI, will integrate NVIDIA’s Physical AI software stack to accelerate development cycles for embodied intelligence, advanced driver-assistance systems (ADAS), and related applications.

Physical AI represents the extension of artificial intelligence into the physical world, enabling AI systems to interact with real-world environments. Typical applications include humanoid robots and advanced autonomous driving systems. Under this partnership, NVIDIA will provide its Physical AI development toolkit while Alibaba Cloud contributes its large-scale AI and big data platform capabilities. Together, they will deliver an end-to-end platform covering data preprocessing, synthetic data generation, model training and evaluation, robot reinforcement learning, and simulation-based testing.

This initiative is part of a broader AI infrastructure overhaul unveiled by Alibaba Group. At the conference, Alibaba CEO Eddie Wu announced a comprehensive upgrade of Alibaba Cloud’s full-stack AI system, spanning from large AI models to underlying AI infrastructure.

Wu revealed that Alibaba plans to invest RMB 380 billion over the next three years in AI models and infrastructure—and will continue to increase investment beyond that. By 2032, the energy consumption capacity of Alibaba Cloud’s global data centers is expected to be ten times higher than in 2022, signaling exponential growth in computing power deployment.

Wu envisions large AI models as the next-generation operating systems and “super AI clouds” as the next-generation computers. He predicts that globally, only five or six super AI cloud platforms will ultimately dominate the market. Alibaba’s large language model, Qwen, aims to become the “Android of the AI era.”

To date, Alibaba Cloud has made significant strides in AI infrastructure and cloud networking, operating 90 availability zones across 29 regions worldwide. According to Omdia’s H1 2025 report, Alibaba Cloud holds a 35.8% share of China’s AI cloud market and ranks first in penetration among China’s top 500 enterprises.

On September 24, Alibaba’s Hong Kong-listed shares (9988.HK) surged 9%, hitting a four-year high, while its U.S.-listed shares (BABA) rose more than 9% in pre-market trading—reflecting strong market confidence in the company’s AI strategy. 

However, some analysts cautioned that while Alibaba’s investment plans are ambitious, investors should also closely monitor returns on these investments. For now, AI appears to be more of a catalyst for market optimism than a direct driver of near-term incremental revenue.