The underlying demand for computing power underscores Alibaba's ambitious layout.

Produced by | Business Show

In the realm of AI investment, Alibaba stands out as the most aggressive player.

According to Xinhua News Agency, on February 24, Alibaba Group CEO Wu Yongming announced that the company will invest over 380 billion yuan over the next three years in cloud and AI hardware infrastructure. This investment surpasses the total amount spent over the past decade and sets a new record for the largest private enterprise investment in China's cloud and AI hardware infrastructure sector.

This significant investment follows two notable milestones: the explosive growth of the domestic AI industry and the convening of a symposium for private enterprises. Wu Yongming remarked, "The explosion of AI has far exceeded expectations, and the domestic technology industry is on the rise with immense potential. Alibaba will spare no effort in accelerating the construction of cloud and AI hardware infrastructure to boost the overall industry's ecological development."

Four days prior, during Alibaba's fiscal third-quarter earnings call for 2025, Wu Yongming emphasized that Alibaba will focus on three primary business types: domestic and international e-commerce, AI+cloud computing technology, and internet platform products. He also revealed that Alibaba will soon unveil a deep reasoning model based on Tongyi Qianwen Qwen2.5-Max.

Lately, discussions surrounding Alibaba have centered around AI and cloud computing, with high expectations for its AI strategic layout.

From a strategic perspective, the AI industry is currently booming globally at an unprecedented rate. According to data from the reputable market research firm Statista, the global AI market size reached $120 billion in 2024 alone, marking a 25% year-on-year growth.

Alibaba's AI strategy is reshaping its valuation. Following collaborations with Apple, Jack Ma's frequent public appearances, and Alibaba's key quarterly results, its market capitalization surged to HK$2.30 trillion. At today's opening, Alibaba's stock price saw a sharp increase but has since retreated slightly, reporting HK$137.7 per share, with a trading volume of HK$16.849 billion and a current market capitalization of HK$2.6173 trillion.

The underlying demand for computing power clearly illustrates Alibaba's ambitious layout. A supply chain source told "Business Show" that Alibaba recently issued a tender for 30 billion yuan, adding a demand for approximately 50,000 H20 servers.

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While AI opens up new horizons, data from Alibaba's fourth-quarter 2024 financial report shows that the Cloud Intelligence Group's revenue accounted for only 13% of the group's total revenue.

It is undeniable that e-commerce remains Alibaba's core business.

The 2024 fourth-quarter financial report reveals that Taobao and Tmall generated revenue of RMB 136.091 billion, a 5% year-on-year increase, accounting for 48.7% of the group's total revenue and contributing the largest segment of revenue to Alibaba. Meanwhile, Alibaba's international segment witnessed a 32% year-on-year revenue growth for the quarter, reaching RMB 37.756 billion, making it the fastest-growing business segment.

Overall, the growth of Alibaba's e-commerce and new retail segments is gradually slowing down. The financial report indicates that while Taobao and Tmall's customer management revenue increased by 9% to RMB 100.790 billion, mainly due to the growth in online GMV and an increase in the Take rate, the overall e-commerce business still faces significant competitive pressure.

Once highly anticipated, the new retail strategy has encountered challenges in recent years. Since 2014, Alibaba has made substantial investments in the new retail sector, including investments in Intime Department Store and the acquisition of Suning.com, with an investment in RT-Mart exceeding $20 billion, yet these have not yielded substantial impacts.

The financial report mentions that the company signed agreements to sell all its equity interests in RT-Mart and Intime Department Store during the quarter, suggesting that these measures reflect Alibaba's strategic shift to optimize operations and focus on core businesses.

Furthermore, the Hema Supermarket model, which rapidly expanded with funding from Alibaba, has also faced external scrutiny.

Coupled with intensifying market competition, e-commerce platforms like Pinduoduo have risen swiftly, capturing market share. According to Pinduoduo's financial report, its revenue and profits have achieved significant growth in recent quarters, and its market capitalization even surpassed Alibaba's for a period. Simultaneously, the rise of short video e-commerce has heightened the fragmentation trend in the e-commerce industry, posing a challenge to Alibaba's traditional e-commerce model.

The new retail-related businesses that Alibaba once heavily invested in have failed to demonstrate robust growth momentum in the financial report, instead becoming a drag on overall performance. This may have compelled Alibaba to urgently seek new growth avenues, with AI emerging as a strategic asset to ride the trend.

As market competition intensifies, Alibaba Cloud clearly remains a top priority for the group. Wu Yongming emphasized, "Whether it's about achieving greater improvements in future model capabilities or addressing the lack of differentiation among companies, we have a very clear business model—our cloud computing network."

While AI technology appears as a "lifesaver," it still faces numerous technical challenges and market obstacles in deeply integrating with e-commerce businesses, requiring time for verification and resolution.

Jack Ma once announced internally that "the methodologies that Alibaba relied on for success in the past may no longer be applicable." Facing a more competitive environment, he believes that Taobao and Tmall need to "return to users, return to Taobao, and return to the internet."

Since becoming Alibaba's new leader, Wu Yongming has frequently mentioned the need to "awaken Alibaba's entrepreneurial mindset" and that the past "must be turned over to zero." Over the past year and a half, Wu Yongming has implemented a series of drastic reforms within Alibaba, highly concentrating resources and energy on core businesses to provide new certainty for the growth of Alibaba's core e-commerce business.

On November 21, 2024, Alibaba Group CEO Wu Yongming issued a company-wide email officially announcing the establishment of the Alibaba E-commerce Business Group and appointing Jiang Fan as the group's CEO. The goal is to achieve greater growth by comprehensively integrating domestic and international e-commerce resources to form a business cluster spanning the entire industry chain.

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Alibaba is not alone in its AI investment spree; other technology giants such as Tencent, ByteDance, and Baidu are also investing heavily.

According to "AI Trends," Tencent Yuanbao is not only aggressively advertising on Tencent family apps like WeChat, QQ Browser, Tencent Video, Tencent News, QQ Music, and Sogou Input Method but is also buying ad space on mobile app stores and other channels. Last week, Tencent Yuanbao surpassed ByteDance Doubao to rank second on the iOS free app chart, trailing only DeepSeek.

Following Alibaba's footsteps, Tencent has also signaled that its AI investment has entered a substantive stage through initiatives such as the "Yuanbao" large model, the integration of DeepSeek into WeChat, and the upgrade of Tencent Cloud.

According to "AI Trends," Tencent recently completed an internal adjustment of products and teams, with more products and applications, including QQ Browser, Sogou Input Method, and ima, officially transferring to CSIG (Cloud and Smart Industries Group). This follows the transfer of Tencent Yuanbao to CSIG in January.

ByteDance is also closely following this trend. According to "New Cortex" by China Business News, last week, ByteDance adjusted the structure of its large model team: Wu Yonghui, a former Google expert who recently joined ByteDance, is now on par with Zhu Wenjia, both serving as heads of ByteDance's large model Seed and reporting to CEO Liang Rubo. Wu Yonghui focuses on the basic model, while Zhu Wenjia focuses on model applications.

Several algorithm and technical leaders who previously reported to Zhu Wenjia, including Xiang Liang, head of ByteDance's AML and Doubao large model Foundation team, Li Hang, director of ByteDance's AI Lab, Yang Jianchao, head of vision multimodal generation for ByteDance's Doubao large model, and Qiao Mu, head of the large language model team for ByteDance's Doubao large model, have shifted their reporting to Wu Yonghui.

Baidu also plans to continue investing in AI infrastructure and shift towards open sourcing. ERNIE Bot has launched deep search functionality and will be fully free from April 1, 00:00; Baidu Search has introduced the full-featured online version of DeepSeek-R1; and the next-generation ERNIE large model 4.5 series will be rolled out in the coming months and officially open sourced from June 30.

Behind the growth of the cloud business lies substantial capital investment, and there is still uncertainty about whether long-term high investment can be consistently converted into stable revenue growth. For now, AI product revenue still accounts for a relatively small proportion of overall revenue and is unlikely to become a core driver supporting Alibaba's development in the short term, relying instead on long-term returns.

It's worth noting that while continually increasing its investment in AI, Alibaba remains focused on cost reduction, efficiency enhancement, and staff reduction. The financial report shows that as of December 31, 2024, Alibaba had a total of 194,320 employees, down from 219,260 as of December 31, 2023.

This signifies a workforce reduction of nearly 25,000 over the past year. "End"