US Embargo On Nvidia Stings Hard, China's AI Development Lags Peers: Alibaba's Joe Tsai Reveals

Alibaba Group Holding Ltd (NYSE:BABA) announced significant price reductions of up to 59% for its cloud services, extending aggressive discounts from China to international markets, from the U.S. to Singapore.

On Monday, Alibaba reduced prices by an average of 23% across approximately 500 cloud product specifications for clients across 13 regions, such as Japan, Indonesia, the United Arab Emirates, and Germany.

Following Alibaba’s significant price reductions of up to 55% on over 100 key cloud services within China in February, which ignited a pricing battle with competitors like JD.com Inc (NASDAQ:JD), the company announced its second substantial price cut in recent months, Bloomberg reports.

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On Monday, cloud executives revealed that these latest discounts would benefit both new and current international clients. One such discount is slashing the price of a widely used one-year data storage package for small businesses from $63 to $16.99. 

Additionally, Alibaba plans to enhance discounts and commission rates for its resellers and extend the availability of its artificial intelligence computing platform, PAI-Lingjun, to Singapore.

Co-founder and chairman Joe Tsai stated that China is two years behind the U.S. in the artificial intelligence (AI) development race, primarily due to Washington’s technology restrictions. 

In a podcast interview, Tsai highlighted the impact of U.S. export restrictions on Chinese companies’ access to advanced semiconductors, like Nvidia Corp’s (NASDAQ:NVDA) GPUs, which has notably affected Alibaba’s cloud business and its capability to provide high-end computing services. 

He emphasized that these restrictions have short to medium-term implications for Alibaba and other Chinese tech firms, SCMP reports.

U.S. updated its export controls last week to further limit mainland China’s access to advanced AI processors and semiconductor-manufacturing equipment. 

Despite these challenges, Tsai mentioned that Chinese companies seek alternatives to circumvent these limitations, such as sourcing processors from other suppliers and stockpiling available chips. 

Tsai also stressed the importance of developing large language models in-house to enhance Alibaba’s cloud business. He pointed out that many of China’s tech companies and those involved in LLM development rely on Alibaba Cloud.

Reportedly, Intel Corp (NASDAQ:INTC) had successfully countered efforts to obstruct its significant chip sales to Huawei, a major Chinese telecommunications firm under heavy sanctions. 

The contentious license allowed Intel to supply Huawei with advanced laptop processors despite objections from competitor Advanced Micro Devices Inc (NASDAQ:AMD) and advocates for tighter sanctions on China, highlighting concerns over fairness and national security.

Prior reports indicated Alibaba’s plans to introduce a new RISC-V processor, the XuanTie C930, through its Damo Academy in 2024 to counteract the impact of stringent U.S. export controls.

Alibaba stock lost over 29% in the last 12 months. Investors can gain exposure to the stock via Invesco Golden Dragon China ETF (NASDAQ:PGJ) and ProShares Online Retail ETF (NYSE:ONLN).

Price Action: BABA shares traded higher by 0.49% at $72.01 premarket on the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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