Apple, AAPL, partners with Alibaba, BABA, to develop AI features for iPhone users in China

Apple (AAPL.O) is teaming up with Alibaba (9988.HK) to introduce artificial intelligence (AI) features for iPhone users in China, The Information reported Tuesday, citing a source with direct knowledge of the matter.

This partnership could end months of uncertainty surrounding Apple’s AI strategy in China, where it has been losing market share to local competitors like Huawei, which has integrated AI tools into its smartphones since last year.

Following the news, Apple shares rose 1.5% in early trading, while U.S.-listed shares of Alibaba climbed 2.6%.

Apple initially chose Baidu as its primary partner last year, but according to the report, Baidu’s progress in developing AI models for Apple Intelligence did not meet the company’s standards.

Apple then explored AI models from Tencent (0700.HK), ByteDance (TikTok’s parent company), Alibaba, and Deepseek. However, it decided against Deepseek due to the startup’s lack of resources and experience to support a large-scale customer like Apple.

Neither Apple nor Alibaba immediately responded to Reuters requests for comment.

According to The Information, the companies have submitted their co-developed AI features for approval from China’s cyberspace regulator.

The rollout is critical for Apple, especially after iPhone sales slipped during the holiday quarter—typically its biggest sales period—due to the absence of AI features, which were expected to be a major selling point for its latest devices.

Still, Apple has forecast strong sales growth for the current quarter, fueling optimism for a rebound in iPhone demand.

The report added that Apple’s decision to partner with Alibaba was partly influenced by Alibaba’s vast data resources on users’ shopping and payment habits, which could help train AI models and offer more personalized services.