After China held a long series of discussions with its tech behemoths, including the largely disappeared Jack Ma of Alibaba among others, it was expected that Chinese firms would come out with major AI announcements to counter the ongoing slew of similar US announcements from Donald Trump. And the first to come up with massive investment plans, is Alibaba. The Chinese e-commerce major has announced plans to invest more than 380 billion yuan ($52.4 billion) in AI and cloud infrastructure over the next three years.
This investment comes even as Alibaba has been facing regulatory challenges in China since 2020. Following years of government scrutiny, the company is now refocusing on AI, e-commerce, and cloud computing. During its latest earnings call, Alibaba CEO Eddie Wu Yongming described AI as an “once-in-a-generation” opportunity.” “If AGI is achieved, the AI-relevant industry will very likely become the world’s largest industry,” he stated.
“Alibaba Group announced plans to invest at least RMB 380 billion (US $53 billion) over the next three years to advance its cloud computing and AI infrastructure, reinforcing its commitment to long-term technological innovation. The investment, which exceeds Alibaba’s total AI and cloud spending over the past decade, underscores the company’s focus on AI-driven growth and its role as a leading global cloud provider,” the Chinese enterprise wrote in an official statement.
The proceeds from the upcoming investment will be deployed towards expanding the enterprise’s existing data centers, as well as boosting its AI infrastructure in order to support the growing demand for AI applications. The investment will exceed Alibaba’s total spending on AI and cloud computing over the past decade, and the Chinese firm aims to leverage the need for substantial computing power (by modern AI models) to establish itself as a provider of cloud-based AI solutions. So far, the company’s cloud division, Alibaba Cloud, has experienced consistent growth and is now its fastest-growing business segment. In the quarter ending December 31, Alibaba Cloud reported an 11% year-over-year increase in revenue, with AI-related products achieving triple-digit growth for the sixth consecutive quarter.
Alibaba’s investment announcement soon after the release of its quarterly financial results, which showed a 7.6% year-over-year increase in revenue, reaching 280.15 billion yuan for the period. This figure slightly exceeded analysts’ expectation and has been well-received by investors, with Alibaba’s Hong Kong-listed shares rising 0.7% to HK$139.40, marking their highest level since November 2021. In US markets, the company’s stock has gained more than 68% since the beginning of the year.
AI has been the cynosure of every eye in the tech industry over the past few years, and now, the new investment by Alibaba places it in direct competition with several Big Tech companies, many of whom have a finger in the (metaphorical) AI pie. In the US, Silicon Valley giant Microsoft plans to put in $80 billion in AI data centers this fiscal year, while social media giant Meta (the parent company of Facebook, WhatsApp, Instagram, and Threads) has earmarked around $65 billion for similar initiatives over the year. Alibaba faces competition in the domestic AI landscape as well – this includes the likes of ByteDance, the parent company of TikTok, which has allocated over 150 billion yuan for capital expenditures this year, with a focus on AI.
