Market Overview

Chinese Cloud Services Rivalry Heats Up As Alibaba, Tencent Face Off

Chinese Cloud Services Rivalry Heats Up As Alibaba, Tencent Face Off

Cloud-as-a-service has emerged as a growth driver for many companies, which explains the huge investments made by some big-name companies such as, Inc. (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG).

Betting On Chinese Cloud Services

As with most other innovative cutting-edge technologies, China has emerged as a force to reckon with in the cloud computing sector. China's overall cloud industry was valued at $48 billion in 2018, the East West Bank said, citing estimates by China's Ministry of Industry and Information Technology.

Homegrown rivals Alibaba Group Holding Ltd – ADR (NYSE: BABA) and Tencent Holdings Ltd (OTC: TCTZF) have their eyes trained on the lucrative Chinese cloud opportunity.

Alibaba's recent third-quarter results revealed that cloud accounted for roughly 6% of its overall revenue, with the segment's revenues coming in at $962 million, up 84% year-over-year. The company is the leading cloud services company in China.

Alibaba, Tencent Lock Horns

Chinese social media and gaming giant Tencent is gearing up to present tough competition to Alibaba, according to a Nikkei report.

Tencent recently released a cloud framework for gaming companies to create cloud-based games without having to hire personnel to develop it from scratch in-house.

The company said it is working on reducing the time needed to build a cloud-based game from months to a few days, the report said.

Incidentally, Alibaba has a tie-up with U.S. chip giant Intel Corporation (NASDAQ: INTC) for cloud gaming.

Cloud technology is revolutionizing the gaming industry, as it allows the streaming of games from servers in data centers, obviating the need for downloading on a particular device.

Since gaming is Tencent's forte, it is logical that the company is digging deep to make an impact in the newest gaming opportunity.

As the Chinese gaming market reaches saturation, the emergence of cloud gaming is likely to kick-start renewed growth in the sector, Nikkei said.

Alibaba shares were trading higher by 0.41% at the time of publication Thursday, while Tencent shares were higher by 0.69%. 

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