# Alibaba's AI Push Hits Profits, Meta's Circular Financing _Alibaba's profits tanked amid AI spending, Meta's reliance on Microsoft raises concerns, and a defense tech startup hits $13B valuation._ **Updated:** 2026-08-22 **Published:** 2026-08-20 **Source:** https://www.startuphub.ai/ai-news/artificial-intelligence/2026/alibaba-s-ai-push-hits-profits-meta-s-circular-financing --- Bloomberg Tech, broadcasting from San Francisco, highlighted significant developments in the tech and financial markets. The program featured discussions on Alibaba's substantial investment in AI, which has impacted its profits, and concerns surrounding Meta's growing reliance on Microsoft's Azure cloud services for its AI initiatives. Additionally, a defense tech startup, Castelion, reached a $13 billion valuation with a $1 billion funding round aimed at boosting its hypersonic missile production. Alibaba AI InvestmentDriver nearly $10 billion quarterly capital expenditure on AI infrastructure and Qwen modelFrom the article 6 mentionsThe program featured discussions on Alibaba's substantial investment in AI, which has impacted its profits, and concerns surrounding Meta's growing reliance on Microsoft's Azure cloud services for its AI initiatives.Meta AI SpendingDrivergrowing reliance on Microsoft's Azure cloud services for its AI initiativesFrom the article 3 mentionsBrody Ford reported on Meta Platforms Inc. () quietly becoming one of Microsoft's () largest AI customers, spending hundreds of millions annually on Azure cloud services.Castelion $13B ValuationCoreFrom the article 2 mentionsAdditionally, a defense tech startup, Castelion, reached a $13 billion valuation with a $1 billion funding round aimed at boosting its hypersonic missile production.SpaceX RumorsContextacquisition rumors and prediction markets discussed for SpaceXChina AI AdvancementsContextChina's AI advancements and regulatory landscape are evolving rapidlyFrom the articleThe report suggests that Meta's substantial spending on Microsoft's AI capabilities might be a precursor to Meta spinning up its own API business, potentially monetizing its AI advancements.Alibaba Profits TankOutcomeFrom the article 2 mentionsDespite a 9% revenue increase, Alibaba's profit plummeted by more than 75%, largely attributed to a nearly $10 billion quarterly capital expenditure on AI.Circular Financing ConcernsOutcomeMeta's reliance on Microsoft raises concerns about circular financingFrom the articleThis business relationship has revived concerns about circular financing, where tech giants are simultaneously customers and competitors.Hypersonic Missile ProductionEffectfunding round aimed at boosting its hypersonic missile production capabilitiesFrom the article 2 mentionsThis round, comprising $800 million in equity and a $250 million revolving credit facility, will fuel the company's plans to scale production of its "Black Beard" hypersonic missile system. ## Alibaba's AI Investment Drains Profits Peter Elstrom, who leads Bloomberg's coverage of Asian tech companies, discussed Alibaba's recent financial performance. Despite a 9% revenue increase, Alibaba's profit plummeted by more than 75%, largely attributed to a nearly $10 billion quarterly capital expenditure on AI. Elstrom noted that while Alibaba is aggressively pivoting into AI, investing heavily in infrastructure and its AI model, known as "Qwen," the financial payoff is proving difficult. The company is competing domestically with open-source models like Moonshot and DeepSeek, which presents profitability challenges. The full discussion can be found on **Bloomberg Technology**'s YouTube channel. ![Alibaba's AI Spending Spree, Concerns of Circular AI Financing | Bloomberg Tech 8/20/2026 - Bloomberg Technology](https://img.youtube.com/vi/Ov3X8cR1Vzg/maxresdefault.jpg) Alibaba's AI Spending Spree, Concerns of Circular AI Financing | Bloomberg Tech 8/20/2026, from Bloomberg Technology Alibaba's core e-commerce business is facing headwinds due to a struggling Chinese consumer, though its cloud computing segment shows strong growth, serving corporate and government clients. The company's CEO has stated that AI, particularly Artificial General Intelligence (AGI), is their "north star," signaling a strong conviction in their AI commitment. However, the immediate financial results reflect the significant costs associated with this strategic shift, with free cash flow widening to $6.6 billion. ## Meta's AI Spending Raises Circular Financing Concerns Brody Ford reported on Meta Platforms Inc. () quietly becoming one of Microsoft's () largest AI customers, spending hundreds of millions annually on Azure cloud services. This business relationship has revived concerns about circular financing, where tech giants are simultaneously customers and competitors. Ford pointed out that for AI to achieve its hyped ROI, it needs broad economic dissemination, yet usage and revenue remain concentrated within a small pool of large, digital-native AI companies. The report suggests that Meta's substantial spending on Microsoft's AI capabilities might be a precursor to Meta spinning up its own API business, potentially monetizing its AI advancements. ## Defense Tech Startup Castelion Valued at $13 Billion The program also spotlighted Castelion, a defense tech startup that secured $1 billion in its Series C funding round, achieving a $13 billion valuation. This round, comprising $800 million in equity and a $250 million revolving credit facility, will fuel the company's plans to scale production of its "Black Beard" hypersonic missile system. Andrew Kreitz, Castelion's co-founder and CFO, highlighted the competitive fundraising process and the significant investor interest. He emphasized that the company's focus on manufacturing and production at scale, rather than just technological development, is key to its strategy. Castelion's products include Black Beard, a longer-range strike system, and defensive interception systems, addressing a dire need for scaled, low-cost solutions. ## AI market volatility and Future Outlook Marta Norton, Chief Investment Strategist at Empower, offered insights into the broader AI market. She noted that while the first half of the year saw triple-digit returns in AI-related stocks, a subsequent "summer washout" cleared some froth. Norton suggested that many AI names might be fully pricing in current good news, with future upside dependent on continued positive fundamentals. She also touched upon the U.S. Treasury's decision to boost buybacks at the long end of the bond market, calling it a short-term solution to more secular, long-term problems. Norton also commented on the rising cost environment for building data centers, questioning whether stakeholders fully appreciate these pressures. ## SpaceX's Acquisition Rumors and Prediction Markets The show also touched upon reports that had approached AI coding startup Cognition AI about a potential acquisition. Cognition's CEO reportedly denied these talks, stating the company is not for sale. The segment also highlighted the booming prediction markets, with Robinhood CEO Vlad Tenev noting that customer demand is clear and these markets are not going away, regardless of legal outcomes. He reported significant growth in this business line, with billions in contracts and a 20x year-over-year increase in contracts. ## China's AI Advancements and Regulatory Landscape Rachel Metz, a Bloomberg AI reporter, discussed the narrowing gap between US and Chinese AI models. She noted that Chinese models are increasingly matching the performance of leading US AI from companies like OpenAI and Anthropic. Metz also highlighted the growing consciousness around the cost of AI tasks, with Chinese companies offering competitive pricing. The program concluded with a look at Massachusetts's proposed AI safeguards, which are the strictest in the nation and have divided the industry, with companies like Anthropic supporting them while OpenAI seeks to slow their release. --- Original analysis from [startuphub.ai](https://www.startuphub.ai), the #1 AI startup directory.