China’s AI firms scaled up on open-source models. The next phase may be different

In China’s hyper-competitive and lucrative tech industry, releasing cutting-edge artificial intelligence models for free may seem counter-intuitive – but it has become a core business strategy.At the University of Hong Kong last November, Alibaba Group Holding chairman Joe Tsai was asked why the tech giant open-sourced its AI models. Addressing a room full of students, Tsai said he believed open-source AI would bring global benefits by lowering costs, making it a natural fit for talent- and cash-poor countries.The company’s flagship AI model, Qwen, has achieved nearly 1 billion cumulative downloads over the past three years, making it by far the most popular open-source model family worldwide.Tsai’s interviewer Tang Heiwai, associate dean of the university’s business school, wanted to know what that meant in terms of profit. “How do you guys make money by being so generous?” he asked, smiling.“We don’t make money from AI, that’s the answer,” Tsai responded, referring to the company’s models. His matter-of-fact remark reflects the company’s stance: while Alibaba, owner of the China-morning-post" class="entity-link entity-organization" data-entity-id="12558" data-entity-type="organization">South China Morning Post, monetises inference and cloud services, it has still made open-source AI a central part of its corporate identity.The question of how to monetise these models, which by their nature hold no intellectual property protections that would allow for straightforward profit-making, has been a recurrent one over the past year.In China, the emergence of DeepSeek early last year sparked a wave of open-source models, with domestic start-ups MiniMax and Zhipu AI riding the wave all the way to blockbuster listings in Hong Kong.