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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"Alibaba sees itself as not only an e-commerce player, but as a broader participant whose businesses span a reach equivalent to Amazon, Google and Facebook," Luria explained. "In order to compete in all these arenas on a global scale, Alibaba will need to invest in all the new technologies that drive mobile engagement, online advertising, social media as well as e-commerce."
The competition is steep in those markets, however. Amazon alone spent just over $16 billion on R&D, while Alphabet follows closely behind it with a $13.9 billion R&D budget. With its $5 billion annual budget, Alibaba is closest to Facebook Inc. (FB) , which spent $5.9 billion on R&D in its most recent fiscal year. Amazon uses some of its research to improve its arsenal of consumer data and make its Alexa digital assistant technology smarter.
Alphabet has attracted a lot of attention for its vast swath of "moonshot" bets, dealing with technologies as far flung as extending human lifespans. Luria said he doesn't expect Alibaba to start making wild moonshot projects with its expanded R&D budget; instead, it'll focus on improving its current set of businesses. He pointed to how greater R&D spending has, in the past, enhanced the social media capabilities on Alibaba's existing platforms, translating to greater mobile engagement.
Morningstar analyst RJ Hottovy said that artificial intelligence will likely be a big focus of the DAMO project. Alibaba in July launched its AI-powered smart speaker, the Tmall Genie, while its public cloud product added a range of artificial intelligence services targeting the health care and manufacturing industries.
DAMO may also help expand Alibaba's presence in big data, IoT and fintech beyond China, Hottovy added.
"They're still behind Amazon, Google and Microsoft Inc. (MSFT) on this front, but this investment will certainly help to narrow that gap," Hottovy said.
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Editors' pick: Originally published Oct. 11.