The frenzy over Chinese artificial intelligence is turning Alibaba Group Holding Ltd. into an investor favorite again, injecting new life into an e-commerce giant that had nearly sunk into obscurity following a years-long regulatory crackdown.

CEO Tim Cook attributed the recent 11% drop in iPhone sales in China to the lack of Apple Intelligence, while local competitors like Huawei moved quickly to fill the gap. In its search for a local AI partner, Apple considered startups such as DeepSeek and ByteDance but ultimately chose Alibaba.

Due to local regulations, Apple needs a Chinese partner to offer its AI services in China. It had been expected to work with Baidu, but chose not to do so. Deepseek was also considered, but as a small start-up there were concerns it would not scale to meet Apple-driven demand.