Chinese conglomerate Alibaba is reportedly offering steep price cuts to its cloud customers.
These markdowns — as high as 59% and aimed at customers from the U.S. to Singapore — come amid a leap in demand for cloud computing to support artificial intelligence (AI) projects, Bloomberg News reported Monday (April 8).
The company has cut prices by an average of 23% for around 500 cloud product specifications for customers in 13 countries, including Japan, Indonesia, the United Arab Emirates and Germany, the report said.
Bloomberg notes that Alibaba CEO Eddie Wu has been leading an effort to overhaul and revamp the company’s main business, which includes an eCommerce unit. Last fall, Alibaba set aside plans to take its cloud business public.
“Given the uncertainties in the current environment, following evaluation, we have decided not to pursue a full spin-off of Cloud Intelligence Group,” Wu said at the time.
This announcement came after the White House said it would suspend shipments of advanced AI, designed by companies like Nvidia, to China in a move aimed at hindering Beijing’s access to cutting-edge U.S. technologies that might enhance the Chinese military.
With that in mind, Alibaba Chairman Joe Tsai told analysts during an earnings call that the firm would instead focus on “developing a sustainable growth model based on emerging AI-driven demand for networked and highly scaled cloud computing services.”
The Bloomberg report notes that Alibaba is the largest cloud service provider in China, though a relatively minor player when put up against the likes of Microsoft and Amazon Web Service (AWS). The company has in recent years lost market share in China to state-backed rivals and struggled to gain any ground abroad amid China’s tech crackdown and U.S. trade restrictions.
Revenue at the cloud division, which surpassed $11 billion in its last full fiscal year, is forecast to drop 2% in the current quarter, the report said, while Tsai said last week that America’s curbs on chips has presented a “big issue” for Chinese cloud companies.
Last month, the Chinese government began taking measures to help its up-and-coming AI startups compete amid the chip shortage, offering “computing vouchers” for smaller firms to help them pay for increasing data center costs.
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