Alibaba's Cloud Business Takes Off, While E-Commerce Struggles

Rapid Growth in Cloud and AI

Alibaba's cloud business is experiencing significant growth, with a 34% increase in the last quarter. This surge is driven by heavy investments in AI, with plans to spend at least 380 billion yuan on cloud computing and AI over the next three years.

Overall Revenue and Profit Challenges

Despite the cloud success, Alibaba's overall revenue grew by only 5%, much lower than the cloud sector. The company's profit fell by 52%, attributed to a price war in China's e-commerce market. Competitors like JD.com also reported a 55% drop in net profit.

CEO's Perspective on AI Investments

Alibaba's CEO highlighted that investments in AI are fueling cloud business growth. The increasing demand for AI might lead to even higher spending than initially planned.

Launch of AI Chatbot Qwen

Alibaba introduced Qwen, an AI chatbot similar to ChatGPT. Within the first week, it garnered 10 million downloads, indicating strong consumer interest in AI technologies.

Stock Performance and Investor Optimism

Alibaba's shares performed well, rising 2% in Hong Kong and 2.4% in New York. This year, the shares have surged by over 90%, reflecting investor confidence in the company's AI advancements.

Chinese Tech Industry: A Mixed Landscape

Other Chinese tech companies are also making strides in AI. DeepSeek, a startup, is challenging U.S. companies in the AI sector. However, Tencent reported a 15% revenue increase, while Baidu's revenue dropped by 7%, showcasing the industry's mixed performance.

Concerns and Market Reactions

Some investors are wary of an AI bubble, but strong earnings from Nvidia last week have eased some concerns.