Alibaba Sparks AI Price War with Massive Discounts
The artificial intelligence (AI) sector in China is about to witness a fierce price war, thanks to Alibaba Group Holding Ltd’s (NYSE: BABA) aggressive pricing strategy. The company has slashed prices on its AI services by up to 97%, prompting immediate reactions from competitors Baidu Inc (NASDAQ: BIDU) and ByteDance Ltd.
The AI price war has begun
This move is expected to ignite a price war in China’s emerging AI sector, with Baidu responding swiftly by offering free services based on its Ernie AI models. ByteDance had already set the stage last week by offering AI services at prices 99% lower than industry norms, benchmarking against Ernie and Alibaba’s Qwen.
“The influx of capital has led to the creation of numerous AI models and a variety of consumer and enterprise products, all vying for a critical user base essential for advancing AI technologies.”
The sector has attracted massive investments from startups and major tech firms like Tencent Holdings Ltd. (OTC: TCEHY). For years, Chinese tech companies have used aggressive discount strategies across various markets, including e-commerce and ride-hailing.
Earlier this year, Alibaba triggered widespread price cuts in cloud computing by offering discounts of up to 55% on over 100 domestic services in March. This move was swiftly matched by JD.com Inc. (NASDAQ: JD), showcasing the highly competitive nature of the market.
Cloud computing is a key area of competition
Like their Silicon Valley counterparts, Chinese tech giants like Alibaba are heavily investing in generative AI. Besides developing proprietary AI models, they are also funding promising ventures such as Baichuan and Zhipu AI, aligning themselves with the global trend led by companies like Microsoft Corp. (NASDAQ: MSFT).
Amid these developments, Alibaba has undergone a major restructuring to reclaim users for its cloud business, which is integral to its AI operations. The company recently surprised investors by canceling plans to spin off this segment into an independent, publicly traded entity.
AI models are the future of technology
Now under CEO Eddie Wu, Alibaba is concentrating on expanding its public cloud services, particularly those targeting enterprise clients, as it battles for market share against traditional rivals like Baidu and Tencent, as well as state-backed newcomers like Huawei Technologies Co.
The AI price war has begun, and it will be interesting to see how the Chinese tech giants navigate this competitive landscape.
