Alibaba Group’s (BABA) Chairman, Joe Tsai, officially confirmed on Thursday a significant partnership with Apple (AAPL), following reports that first surfaced on February 11. The announcement had an immediate market impact, driving Alibaba’s Hong Kong-listed stock (HK:9988) up by more than 9% and pushing it to a three-year high.
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The collaboration will bring advanced artificial intelligence (AI) features to iPhones sold in China. This move aligns with Alibaba’s strategy to strengthen its position in the AI sector and expand the reach of its Qwen 2.5 AI model in consumer devices.
Alibaba’s Qwen 2.5 to Power AI Features in Chinese iPhones
The partnership between Alibaba and Apple involves integrating Alibaba’s AI model, Qwen 2.5, into iPhones sold in China. Qwen 2.5 has been reported to outperform models like DeepSeek-V3 in both capability and cost efficiency.
Its integration is expected to improve features such as voice recognition, content recommendations, and photo editing for Chinese iPhone users.
What This Deal Means for Apple
Apple’s decision to collaborate with Alibaba comes amid declining iPhone sales in China, driven by competition from local brands like Huawei and Xiaomi, which have quickly integrated advanced AI features.
By teaming up with Alibaba, Apple aims to regain its competitive edge in the Chinese market. The partnership not only taps into Alibaba’s AI expertise but also aligns with China’s regulatory environment, which favors domestic collaborations for technology adoption.
This move is expected to help Apple strengthen its market position by providing Chinese consumers with localized and AI-driven smartphone experiences.
Morgan Stanley’s Take on the Deal
Morgan Stanley views the Apple-Alibaba partnership as a “critical catalyst” for Apple’s competitive position in China.
The firm highlighted Alibaba’s vast data resources, which could enhance Apple’s AI capabilities for Chinese users. The firm also sees a possibility where Apple’s AI partnership with Alibaba serves as a starting point, eventually extending to other local Chinese cloud providers. Morgan Stanley maintains an Overweight rating on Apple, with a $275 price target.
Is AAPL a Good Stock to Buy?
On TipRanks, AAPL has a Moderate Buy consensus based on 18 Buy, 11 Hold, and 4 Sell ratings assigned in the past three months, as indicated by the graphic below. The average AAPL price target of $250.94 per share implies 5.94% upside potential.
Is BABA Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus for Alibaba is Strong Buy based on 11 Buy and one Hold rating over the last three months. At $121.38, the average BABA price target implies a 2.96% upside potential.
