Shares of Alibaba Group Holding Ltd. (BABA-W) extend rally to 8% on Wednesday, following reports that Apple has partnered with the Chinese tech giant to develop AI features for iPhones in China.

According to reports from The Information and Reuters, Apple has chosen Alibaba as its partner for building AI models for services like Siri on iPhones in China. Apple had previously tested AI models from Baidu, Tencent, ByteDance and others, but was unsatisfied and decided to partner with Alibaba.

The partnership is seen as a positive for both companies. For Apple, it helps address a key shortcoming as the company has yet to roll out advanced AI features for Siri and other services on iPhones in China, impacting sales. For Alibaba, it cements its position as a leader in AI and cloud services in China.

"We view this as a positive for Apple given their commentary on the recent earnings call that iPhone sales have been stronger in markets where AI features are available," said Evercore ISI analyst Amit Daryanani. "China has become a more competitive market in recent quarters, so it is encouraging to see some positive developments given many expected securing regulatory approval for AI features to be a challenge."