Chinese AI models are surging globally, favoured by some companies for their functionality and low cost, sparking fierce domestic competition.

Tech giant Alibaba's AI app Qwen on Monday said it would dish out three billion yuan ($430 million) to users in digital "red envelopes" -- a form of traditional cash gifts -- starting February 6, following similar campaigns by competitors Tencent and Baidu.

Users who register with the apps have daily chances to snap up red envelopes, usually only worth a few cents.

Baidu, doling out 500 million yuan, is offering larger prizes, including iPhones and TVs.

Tencent's AI app Yuanbao is giving out one billion yuan, with a top prize worth 10,000 yuan.

Interacting within the app, like discussing the holiday with its chatbot, can earn users additional chances.

Alibaba's announcement comes a week after it released its latest model, Qwen3-Max-Thinking, which it claims beats Google's newest model on reasoning, according to a statement.

Baidu also released a new model on January 22.

US media outlet the Information reported that the tech companies are also looking to release new AI models during the Lunar New Year holiday, following last year's DeepSeek surprise.

During last year's Lunar New Year in January, Chinese startup DeepSeek stunned the world with its low-cost AI model that performed on par with US rivals.

Analysts say DeepSeek's decision to make its system's inner workings public, in contrast to the closed AI models sold by OpenAI and other Western rivals, has boosted adoption of its tools by developers and businesses.