Alibaba bets $53bn on cloud and AI

Alibaba will invest RMB 380 billion (US$53bn) in its cloud computing and artificial intelligence (AI) infrastructure over the next three years in a bid to dominate the next wave of technological innovation.

This investment surpasses Alibaba’s total spending on cloud and AI in the past decade as it looks to AI as a “once-in-a-generation” opportunity and cloud computing as its primary engine for future revenue growth.

During its latest earnings call, Alibaba CEO Eddie Wu described the transformative potential of AI, particularly artificial general intelligence (AGI), singling out AI’s ability to replicate human intellectual and physical labour which could fundamentally reshape global industries.

Wu also highlighted the symbiotic relationship between AI and cloud computing, noting that the exponential growth of AI models will require cloud infrastructure to process and distribute vast amounts of AI-generated data.

Alibaba’s latest move aligns with its “user-first, AI-driven” strategy outlined in a May 2024 shareholder letter. The company aims to integrate AI across its ecosystem, from e-commerce to enterprise and consumer applications, to enhance customer experience, streamline operations and drive growth.

Alibaba’s cloud intelligence unit reported 11% year-over-year revenue growth in the latest quarter, excluding consolidated subsidiaries. Its AI-related product revenue grew in the triple-digit range for the sixth consecutive quarter, thanks to rising demand for its AI hosting and related offerings.

Beyond organic growth within its own ecosystem, Alibaba is leveraging external partnerships. Alibaba Cloud has reportedly been chosen by Apple to support its AI services within China. While details are scarce, the partnership is understood to be crucial for Apple to navigate China’s data localisation regulations.

Using Alibaba Cloud’s infrastructure would allow Apple to offer advanced AI features to its Chinese users while adhering to local laws. This marks a significant win for Alibaba Cloud, further validating its AI capabilities and positioning it as an enabler for global tech giants looking to deploy AI services in the complex Chinese market.