<div id="readability-page-1"><span></span><div id="ArticleBody-InlineImage-108289092"><div><div><p>A mechanical hand is on display at the Robot Mall, world's first embodied intelligent robot 4S store, on August 13, 2025 in Beijing, China.</p><p>Vcg | Visual China Group | Getty Images</p></div></div></div><div><p>BEIJING — <span id="RegularArticle-QuoteInBody-1">Alibaba<span><span id="-WatchlistDropdown"></span></span></span> Cloud is investing in a new type of artificial intelligence designed to better replicate the real world using a different approach from chatbots such as OpenAI's ChatGPT.</p><p>The shift recognizes the limits of &#34;large language models&#34; trained primarily on text. Instead, developers are starting to focus more on &#34;world models&#34; built on videos and real-life physical scenarios.</p><p>To jump on the trend, Alibaba led a 2 billion yuan ($290 million) investment in ShengShu, the startup behind the AI video generation tool Vidu, the company announced Friday. TAL Education and Baidu Ventures also participated in the series B funding round.</p><p>The investment comes about two months after ShengShu raised 600 million yuan from Qiming Venture Partners and other backers. The startup declined to disclose its valuation.</p><p>ShengShu said the latest funding will support building a &#34;general world model&#34; that can use AI to bridge two currently separate domains: the digital world of games and AI-generated video, and the physical world of autonomous driving and robots.</p><p>&#34;ShengShu believes that a general world model, built on multimodal data such as vision, audio, and touch, more naturally captures how the physical world works than large language models,&#34; the three-year-old startup said in a statement. </p></div><div><p>&#34;We aim to connect perception and action,&#34; Zhu Jun, founder of ShengShu, added in a statement, allowing AI systems to better model and predict real-world behavior consistently.</p><p>ShengShu's latest Vidu Q3 Pro model, released in January, ranks among the top 10 AI models for generating videos from text and images, according to Artificial Analysis.</p><p>The company launched Vidu globally months before OpenAI made its now-shuttered Sora tool for AI video generation widely available. Chinese short-video companies <span id="RegularArticle-QuoteInBody-8">Kuaishou<span><span id="-WatchlistDropdown"></span></span></span> and ByteDance have also released similar competing AI tools for generating videos.</p></div><h2>World model competition</h2><div><p>Alibaba has expanded its investments in related startups.</p><p>The Chinese tech giant and Baidu Ventures last month led a $50 million investment in Tripo AI, a platform that uses AI to quickly generate digital 3D models from photographs. Tripo said it is also moving away from techniques used by language models toward AI tools grounded in physical space and is developing its own world model.</p><p>In September, Alibaba also led a $60 million investment in PixVerse, which released an AI world model earlier this year that allows users to direct how a video unfolds while it is being generated.</p><p>Alibaba, which got its start in e-commerce, has also released free, open-source AI models for video generation and, in February, launched one for powering robots. </p></div><div><div>  <div id="tcc-wrapper">  <div>   <p><img src="https://imageproxy.pbkrs.com/https://fm.cnbc.com/applications/cnbc.com/resources/styles/skin/special-reports/the-china-connection/tcc_widget_logo_2026.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="278" height="79" original-src="https://imageproxy.pbkrs.com/https://fm.cnbc.com/applications/cnbc.com/resources/styles/skin/special-reports/the-china-connection/tcc_widget_logo_2026.png"/>   </p>   <div>    <p>Weekly analysis and insights from Asia's largest economy in your inbox<br/>    Subscribe now</p>   </div>  </div> </div></div></div><div><p>Shengshu said Friday it has strategic partnerships with companies developing embodied AI — systems such as humanoid robots that interact with the physical world — for use across industrial, commercial and home settings.</p><p>World models are critical for robotics because the technology needs more than LLMs to work, Kevin Kelly, co-founder of the U.S. tech magazine Wired, wrote last month on his Substack.</p><p>Ultimately, to replicate human intelligence, AI will need three things: reasoning, an understanding of the physical world and continuous learning, Kelly said. While AI for the learning category hasn't been developed yet, LLM-powered chatbots have created the knowledge element, he said, making world models a key area requiring a breakthrough.</p></div><div><div id="RegularArticle-RelatedContent-1"><div><div><h2>Read more China news</h2><div><ul><li>Alibaba launches data center with 10,000 of its own chips as China ramps up AI push</li><li>'The thaw is real': Indian delegation visits China to talk EVs and more</li><li>Why AI isn't replacing jobs in China (yet)</li><li>Beijing's surprise intervention on Meta's Manus rattles tech founders, VCs eyeing 'China shedding'</li><li>Three niche commodity prices are surging. What they show about China's grip on supply chains</li></ul></div></div></div></div></div><div><p>Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.</p></div></div>

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<p>Alibaba Cloud has led a $290 million investment in startup ShengShu, which aims to develop a "general world model" for AI, moving beyond traditional large language models. This funding will support the creation of AI systems that integrate multimodal data to better replicate real-world scenarios, enhancing applications in robotics and autonomous driving. ShengShu's Vidu model ranks among the top AI video generation tools, and the company has strategic partnerships for embodied AI development. This investment reflects a broader trend in AI focusing on physical world understanding.</p>

- Alibaba Cloud is investing 2 billion yuan ($290 million) in ShengShu to develop a "general world model" for AI that more accurately reflects real-world scenarios, moving away from traditional large language models.  
- This funding aims to integrate digital and physical realms, enhancing the capabilities of AI in generating video content and improving robotics through better perception and action modeling.  
- ShengShu's advancements compete with similar tools from Kuaishou and ByteDance, emphasizing the need for world models to effectively replicate human intelligence in AI systems.

Alibaba leads $290 million investment for building a new kind of AI model as LLM limits emerge