Alibaba and Apple’s AI Deal Stalls as Beijing Holds Back Approval

Apple (AAPL) and Alibaba (BABA) were gearing up to launch Apple Intelligence—a suite of AI features powered by Alibaba’s technology—for iPhone users in China. But the plan has hit a snag. Beijing’s internet regulator, the Cyberspace Administration of China (CAC), has yet to give the green signal. The approval process has been slowed down due to rising tensions between the U.S. and China, made worse by trade conflicts during Donald Trump’s administration.

As a result, the regulatory process has become increasingly complex. In China, all AI services must receive CAC approval before being released to the public. For projects connected to U.S. companies, like this partnership, the review has become slower amid ongoing trade talks between the two countries. The final decision lies with the State Council, which can either speed up or delay approval depending on the broader trade relationship.

Apple’s Struggle to Stay Competitive in China

The delay in regulatory approval is a big setback for Apple as it works to regain momentum in China, its second-largest market. In the first quarter of 2025, Apple generated around $16 billion in revenue from China. However, iPhone sales have been declining, while local players like Huawei, Xiaomi, and Vivo continue to gain market share with smartphones equipped with advanced AI capabilities.

Against this backdrop, Apple CEO Tim Cook has worked hard to balance relations between Washington and Beijing. Yet, managing both sides has not been easy. Trump urged Apple to shift its manufacturing back to the U.S. and even threatened hefty tariffs if the company failed to comply. These political pressures have added friction to Apple’s already complex operations in China.

To stay competitive, Apple had hoped that integrating Alibaba’s AI would allow its iPhones to better match local rivals. But with the deal still waiting for approval, Apple is falling behind in a fast-moving market where AI is now a major selling point.

What This Means for Alibaba

The delay impacts not only Apple but also represents a major setback for Alibaba. When the partnership was announced in February, it sparked optimism about Alibaba’s AI potential. Its Hong Kong-listed shares surged to a three-year high, reflecting investor excitement over the company’s role in powering Apple’s new AI features. The deal was expected to boost Alibaba’s position in the AI race and expand the reach of its Qwen 2.5 model in consumer-facing devices.

However, with the project now in limbo, those ambitions are at risk. The delay could slow Alibaba’s momentum just as competition is heating up at home. Domestic rivals like DeepSeek and Baidu (BIDU) are advancing quickly in AI, making it harder for Alibaba to maintain its edge.

What’s more, if the Apple deal ultimately falls through, the impact could extend to Alibaba’s cloud business as well. The company’s cloud division grew 18% in Q4 FY25 to $4.2 billion, and partnerships like this were expected to further fuel that growth.

Is BABA Stock a Buy, Sell, or Hold? 

Turning to Wall Street, the analysts’ consensus for Alibaba is Strong Buy based on 11 Buy ratings over the last three months. At $164.05, the average BABA price target implies a 37.34% upside potential.

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Is AAPL a Good Stock to Buy?

On TipRanks, AAPL has a Moderate Buy consensus based on 16 Buy, nine Hold, and four Sell ratings assigned in the past three months, as indicated by the graphic below. The average AAPL price target of $228.79 per share implies 12.80% upside potential.

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