The Shift Towards AI Applications
Last year, Kai-Fu Lee of Zero One Technology emphasized the importance of focusing on AI applications rather than solely on developing large language models (LLMs). While Lee’s comments were met with skepticism, the trend towards AI applications is undeniable. After two years of intense competition in the LLM space, the AI application landscape remains largely untapped. From a business perspective, developing AI applications offers several advantages. First, ecosystem positioning is critical. Similar to the early days of iOS, early adopters of AI application development gain a significant competitive edge by establishing themselves as leaders in the nascent ecosystem. Second, market demand is substantial and growing rapidly. OpenAI’s projected revenue growth from $3.7 billion in 2024 to $12.7 billion in 2025 and $29.4 billion in 2026 demonstrates the immense and increasing demand for AI solutions across various industries. This rapid growth signifies a real and expanding market for AI applications.
In short, focusing on AI applications represents the next major growth opportunity compared to the saturated LLM market. The development and deployment of AI applications offer a more direct path to monetization and value creation, as businesses seek to leverage AI to solve specific problems and improve their operations. Providing ecosystem services to AI application developers is the most promising area within this emerging landscape. By offering tools, platforms, and resources that facilitate the creation and deployment of AI applications, companies can capture a significant share of the growing AI market. This approach enables a broader range of businesses and developers to participate in the AI revolution, driving innovation and adoption across various sectors.
The MCP: Bridging the Gap Between Models and Applications
DeepSeek’s advancements in LLMs in 2025 have spurred the creation of specialized branches within the AI industry. While LLMs will undoubtedly continue to evolve, the competitive landscape has largely solidified, with major players in both the US and China having established their positions. LLM development has effectively become a race between national teams, making it difficult for newcomers to compete effectively against well-funded and established players. This consolidation has shifted the focus towards leveraging existing LLMs to create practical and valuable applications.
From an application perspective, LLMs have empowered developers to rapidly realize their ideas with robust underlying capabilities. The increased computational power and sophistication of LLMs have made it easier for developers to build AI-powered features into their applications, reducing the time and resources required to develop complex AI solutions. The popularity of Manus highlights the value of intelligent agents, which can deliver superior user experiences even with less sophisticated infrastructure. This is a major boon for application developers, enabling them to create better products and explore new possibilities by leveraging the capabilities of intelligent agents to automate tasks, personalize user experiences, and provide real-time support.
Developers can now focus on building compelling applications and wait for LLMs to provide even better underlying capabilities. As I mentioned, the next major application of AI models is in tool utilization, and the MCP serves as a critical hub connecting tools and models within applications. Developers can concentrate on the value and interaction of their products, leaving the rest to the MCP. This allows developers to focus on the user experience and core functionality of their applications, rather than spending time and resources on developing and maintaining their own AI models and infrastructure. The MCP provides a seamless and efficient way to integrate AI capabilities into applications, enabling developers to build more powerful and innovative solutions.
Hopefully, more people now understand the value of the MCP and the significance of Alibaba’s initiative. While the technology behind the MCP may not be groundbreaking, its strategic value within the ecosystem is undeniable, making it a crucial area for Alibaba Cloud to dominate. The MCP represents a key component of Alibaba Cloud’s broader AI strategy, enabling the company to capture a larger share of the growing AI market and establish itself as a leader in the AI ecosystem.
Consider Alibaba’s actions after declaring its ‘All in AI’ strategy:
Developing the Qwen LLM to showcase its technological prowess and establish its presence in the LLM space. Qwen serves as a demonstration of Alibaba’s AI capabilities and provides a foundation for future AI developments.
Investing in leading LLM startups to capitalize on emerging opportunities and gain access to innovative technologies. These investments allow Alibaba to stay at the forefront of AI research and development and identify promising new AI applications.
Providing computing power to LLM companies to generate revenue for Alibaba Cloud and support the development of advanced AI models. This provides a valuable service to LLM developers and generates revenue for Alibaba Cloud’s infrastructure business.
Offering computing resources to AI application companies to drive growth for Alibaba Cloud and enable the creation of innovative AI solutions. This supports the growth of the AI application ecosystem and generates demand for Alibaba Cloud’s computing resources.
Creating the MCP ecosystem platform to enable AI application companies to leverage various LLMs and build powerful AI-powered applications. The MCP provides a central hub for connecting AI models, tools, and developers, facilitating the creation and deployment of AI applications.
These actions demonstrate Alibaba’s clear strategic path and comprehensive plan for the AI-to-B market. Wu Yongming recognized that Alibaba Cloud is the sole entity capable of executing the ‘All in AI’ strategy. As a B2B business, Alibaba Cloud must commercialize AI on its existing foundation. Therefore, pioneering the MCP ecosystem platform around the AI-to-B market aligns perfectly with Alibaba’s future interests. The MCP is a key enabler of Alibaba Cloud’s AI strategy, allowing the company to leverage its existing infrastructure and expertise to capture a significant share of the growing AI market.
This is where the ‘All in AI’ strategy comes to fruition. Alibaba Cloud’s decision to develop and launch the MCP promptly is a timely and strategic move. With the MCP, Alibaba Cloud has completed its AI industry chain layout, including IT infrastructure, AI computing power, and access to LLMs. Now, with the MCP ecosystem in place, the company is poised to support the development of innovative AI applications and drive the adoption of AI across various industries. The MCP provides a comprehensive platform for AI application development, enabling businesses to leverage the power of AI to solve specific problems and improve their operations.
Alibaba Cloud vs. Baidu vs. Google
Last year, I said that Baidu was directionless and should have focused on MCP rather than LLMs. Baidu seems unsure of its objectives, clinging to the notion of ‘matching Google’ and ‘leading in technology’ to drive its AI and LLM efforts. It chases after every technological trend, blindly investing in areas like NLP, autonomous driving, and LLMs, without achieving tangible results. This is because Baidu sees itself as a ‘technologically advanced company,’ prioritizing technological innovation over practical application and business strategy.
In this round, Baidu made an even bigger joke. In February, DeepSeek humiliated Baidu by proving that its LLM was inferior to the smaller team, highlighting the challenges Baidu faces in competing with more focused and innovative AI companies. Then, it was confirmed that Apple had replaced Baidu with Alibaba as its AI partner in China, further undermining Baidu’s position in the AI landscape and demonstrating the growing importance of Alibaba’s AI capabilities.
Baidu faces further embarrassment in April as companies begin to launch their MCPs. Alibaba Cloud launched first on April 9, followed by Google on April 10. Baidu launched on April 25. While the timing may not be critical, Baidu launched later than the others. Does Baidu have the infrastructure to support the MCP? Alibaba announced ‘All in AI’ and has been strategically on point. Now MCP is part of Alibaba’s overall strategy. But what about Baidu? Baidu’s late entry into the MCP space raises questions about its strategic focus and ability to compete with more agile and focused companies like Alibaba Cloud.
While it’s not quite ‘missing the boat,’ Baidu’s response was slow. Baidu’s delayed response to the emergence of MCPs suggests a lack of strategic foresight and an inability to adapt quickly to changing market conditions. This could further weaken Baidu’s position in the AI market and make it more difficult for the company to compete with Alibaba Cloud and other leading AI players.
The Future of MCP
The importance of MCP will become more apparent in the next three years. Alibaba Cloud’s launch of MCP represents a complete All in AI layout. While AI may not show obvious value to consumers, In the toB end, this momentum will quickly be reflected in future performance. The MCP is poised to drive significant growth in the enterprise AI market by providing a comprehensive platform for developing and deploying AI applications. Alibaba Cloud’s early lead in the MCP space positions the company for long-term success in the rapidly evolving AI landscape. This proactive approach enables businesses to harness the power of AI to optimize operations, improve customer experiences, and develop innovative new products and services. The momentum generated by Alibaba Cloud’s All in AI strategy will translate into improved financial performance and increased market share in the years to come.
The strategic value of the MCP lies in its ability to simplify the integration of AI models into existing business processes and applications. This enables businesses to leverage the power of AI without the need for extensive in-house expertise or complex infrastructure. By providing a central hub for connecting AI models, tools, and developers, the MCP fosters collaboration and innovation within the AI ecosystem.
Furthermore, the MCP facilitates the development of customized AI solutions tailored to the specific needs of individual businesses. This allows businesses to leverage AI to solve unique problems and gain a competitive edge in their respective industries. The ability to customize AI solutions is a key differentiator for the MCP and a significant advantage for businesses seeking to adopt AI technologies.
The long-term success of the MCP will depend on Alibaba Cloud’s ability to continuously innovate and expand the platform’s capabilities. This includes adding support for new AI models, developing new tools and features, and fostering a vibrant ecosystem of developers and partners. By investing in ongoing development and innovation, Alibaba Cloud can ensure that the MCP remains a leading platform for AI application development and deployment.
In conclusion, Alibaba Cloud’s launch of the MCP is a strategic move that positions the company as a key player in the evolving AI landscape. The MCP represents a complete All in AI layout and is poised to drive significant growth in the enterprise AI market. While the value of AI may not be immediately obvious to consumers, the momentum generated by Alibaba Cloud’s All in AI strategy will quickly be reflected in future performance. The company’s commitment to innovation and its comprehensive AI strategy make it well-positioned for long-term success in the rapidly evolving AI market.