Apple has selected Alibaba as its artificial intelligence (AI) partner in China, a move designed to reclaim its position in the world’s largest smartphone market.

Alibaba Group Chairman Joe Tsai confirmed the partnership on Thursday at the World Governments Summit in Dubai.

“[Apple] talked to a number of companies in China, and in the end, they chose to do business with us. They want to use our AI to power their phones,” Tsai said.

The announcement saw Alibaba’s Hong Kong-listed shares rise 2.5%, while Apple’s stock also surged. The partnership comes as Apple faces mounting competition from domestic rivals.

Its Greater China revenue fell 11% year-over-year to $18.51 billion in the last quarter of 2024, while its smartphone shipments in China dropped 17%, pushing it to third place behind Vivo and Huawei.

A key challenge for Apple has been the absence of AI-driven features in its iPhones, an area where competitors like Huawei have excelled. Strict Chinese AI regulations have delayed Apple’s ‘Apple Intelligence’ initiative in the country, as large language models require government approval.

For Alibaba, the deal reinforces its leadership in AI, with its Qwen 2.5 model outperforming competitors. The company’s stock climbed over 40% in early 2025, reflecting investor confidence in its AI advancements.