- Alibaba Group Holding Limited (NYSE:BABA) is slashing the cost of its cloud services by up to 50% while it explores spinning off the fast-growing Aliyun business.
- Alibaba and Tencent Holding Ltd (OTC:TCEHY) are contesting to tap the demand for the raw computing power needed to train generative artificial intelligence models like OpenAI's ChatGPT, which has ignited a global race.
- Core products of the Aliyun subsidiary will see 15% - 50% cuts from May 7, Bloomberg cites an Alibaba spokesperson.
- Alibaba expressed its commitment to expanding its cloud business, now led by group CEO Daniel Zhang, which it sees as a potential driver of exponential growth.
- Alibaba's Tongyi Qianwen AI model has received over 200,000 requests from businesses to join its beta testing program from industries including fintech, electronics, transport, fashion, and dairy farming.
- It sees the hand-in-hand provision of AI and cloud infrastructure services as a winning formula for wooing a large swath of the domestic market.
- Bloomberg analysts see the price cut affecting the unit's adjusted Ebita in FY24. The move reflects Alibaba's price war against rivals at the cost of cloud profit gains.
- Alibaba Cloud holds the largest market share in China and Asia, contributing about 9% of revenue.
- Alibaba is testing one of its early AI integrations, Tongyi Qianwen, in Alibaba's operating system for cars, AliOS. IM Motors, an electric vehicle venture backed by Alibaba and SAIC Motor Corp, has signed up to be the first auto brand to implement Tongyi Qianwen-powered AliOS.
- Alibaba's cloud division is one of its fastest-growing and prime candidates for a future initial public offering.
- However, the stock lost over 12% last week as China's geopolitical tensions with the U.S. intensified.
- Price Action: BABA shares are up by 1.51% at $84.17 premarket on the last check Wednesday.
- Photo via Wikimedia Commons
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