What Alibaba Is Planning to Do With Its New $15 Billion R&D Budget

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Posted on October 19, 2017

The Chinese e-commerce giant Alibaba hopes to catch up to the likes of Amazon, Google and Facebook in artificial intelligence, cloud computing, the internet of things and quantum computing.
Oct 14, 2017 7:40 AM EDT
What Does Alibaba Actually Do?
China’s largest e-commerce company, Alibaba Group Holding Ltd. (BABA – Get Report)  is doubling down on its push to catch up with U.S. tech giants such as Amazon.com Inc. (AMZN – Get Report) and Alphabet Inc. (GOOGL – Get Report) .
The deep-pocketed firm said it plans to spend $15 billion on research and development over the next three years, increasing its R&D budget to $5 billion annually, up from the $2.5 billion it spent in its previous fiscal year. Alibaba said the investment would be used to develop “cutting-edge” technologies such as artificial intelligence, quantum computing, fintech and the internet of things, as part of a new research project called Alibaba’s Academy for Discovery, Adventure, Momentum and Outlook, or DAMO.
The announcement came during Alibaba’s annual cloud computing conference in Hangzhou, where, among other things, the company said it’s on track to eventually surpass Amazon as the world’s top cloud services provider.
Alibaba CTO Jeff Zhang will lead the DAMO initiative, which will start by opening labs in cities around the world, including Beijing, Hangzhou, San Mateo, Calif., Bellevue, Wash., Moscow, Tel Aviv and Singapore. Alibaba is looking to hire 100 researchers to work on the program, which it says will help it reach its previously-announced goal of serving two billion customers and creating 100 million jobs by 2036.
“We aim to discover breakthrough technologies that will enable greater efficiency, network security and ecosystem synergy for end-users and businesses everywhere,” Zhang said in a statement.
Shares of Alibaba were slightly higher by 0.2% to $183.63 on Wednesday morning. The stock has skyrocketed more than 109% so far this year.
Alibaba is dedicating a sizable chunk of money toward R&D, but the amount’s it’s investing are still relatively small compared to its annual revenues, which are expected to reach more than $35 billion in 2018. The company has largely made a name for itself as an online marketplace, but mirroring the moves of Silicon Valley firms, it has recently veered into newer areas such as cloud computing and artificial intelligence.
The moves, including the newly announced DAMO project, are part of Alibaba’s larger vision of becoming a global Internet leader, said D.A. Davidson Co. analyst Gil Luria.

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