During beginning of 2025, Apple & Alibaba partnered to integrate AI features into iPhones sold in China. Alibaba’s chairman, Joe Tsai, confirmed the deal, noting that Apple chose Alibaba after evaluating other Chinese AI firms like Baidu, Tencent, ByteDance, and DeepSeek. The partnership leverages Alibaba’s Qwen 2.5 AI model, which reportedly outperforms models like DeepSeek-V3 and competes with global leaders like OpenAI’s GPT-4o. This move addresses Apple’s lagging AI rollout in China, where regulatory approval requires local partnerships, and aims to counter declining iPhone sales (down 17% in 2024, with Apple holding 15% market share, behind Vivo and Huawei).

However, the deal faces scrutiny from U.S. officials, with the White House and Congress raising concerns in May 2025 about potential enhancements to Chinese AI capabilities, censorship compliance, and data-sharing risks under Beijing’s laws. This echoes past U.S. pressure that led Apple to abandon a chip deal with a Chinese supplier in 2022. Partnership could boost Apple’s market position if regulatory hurdles are cleared, but some doubt its ability to significantly reverse sales declines due to strong competition from Huawei and consumer preference for local apps like WeChat. Alibaba’s stock surged over  in 2025, reflecting investor confidence. The deal’s success hinges on navigating China’s strict AI regulations and U.S.-China geopolitical tensions.

Deal could indirectly strengthen Beijing’s censorship and surveillance systems, especially since Apple must comply with local AI regulations. The U.S. is also concerned about losing its AI edge, with China’s heavy investments $61 billion in AI funding in 2024 is closing the technological gap.

China is advancing rapidly in the global AI race, challenging U.S. dominance through massive investments, strategic policies, and technological breakthroughs. In 2024, China invested significant capital in building  AI capabilities nearly matching U.S. spending, with state-backed programs like the “New Generation AI Development Plan” driving innovation. Companies like Alibaba, with its Qwen 2.5 model rivaling GPT-4o, and others such as Baidu, Tencent, and ByteDance are producing cutting-edge AI systems, particularly in natural language processing and computer vision. China’s AI patent filings surpassed the U.S. in 2023, with 29,000 versus 26,000, and its share of global AI research papers hit 28% in 2024, up from 20% in 2020.

U.S. concerns about China’s AI capabilities, particularly in the context of the Apple-Alibaba AI deal is cantered on national security, technological competition, and data privacy. The White House and Congress are scrutinizing the partnership due to fears that it could enhance China’s AI prowess. Alibaba’s Qwen 2.5 model, which rivals global leaders like GPT-4o, underscores China’s rapid AI advancements, raising alarms about potential military or surveillance applications. U.S. officials worry that Apple’s collaboration might involve sharing sensitive technology or data, given China’s laws mandating government access to corporate data. This echoes broader tensions, as seen in past U.S. actions like export controls on advanced chips and sanctions on Chinese tech firms.

Galactik Views