This paper explores the complex dynamics between alliance intensive exploratory and exploitative strategies, and their influence on market diversification. It challenges the largely held conventional wisdom that exploratory strategies restrict market diversification while efficiency gains from exploitative strategies enable it. By adopting a nuanced perspective, it scrutinizes how ambidextrous firms, those engaging in both strategies through strategic alliances, navigate these trade-offs, to complement their capabilities and facilitate or constrain market diversification. Analyses on a large dataset of global private equity (PE) deals transacted in the period 2000-2022 reveals that while exploitative value creation modes (like conventional LBOs) linked with high alliance activity enhance market diversification, exploratory value creation strategies (such as synergistic add-on deals) encourage sectoral diversification but lead to a more geographically concentrated portfolio of PE investments. The findings illuminate the role of alliances in shaping market diversification outcomes for ambidextrous firms who engage in simultaneous exploration and exploitation.