Alibaba Cuts AI Model Prices to Boost Market Share

Alibaba Group Holding (NYSE: BABA) has made headlines by reducing its large language model prices by up to 85%. This move highlights the intense competition among Chinese tech companies in the artificial intelligence sector.

To capture a larger share of the market, Alibaba Cloud initiated significant discounts on its visual language model, Qwen-VL, as reported in a post on WeChat. The company first announced similar reductions of up to 55% on its core cloud services back in February.

In another aggressive pricing strategy, Alibaba previously lowered the costs of its Qwen AI model by as much as 97% in May. The Qwen-VL model is capable of interpreting both text and images, providing valuable tools for businesses.

Chinese tech giants like Alibaba, Tencent, Baidu, and JD.com are all launching their own large language models, contributing to a fierce price war in the AI landscape. During the third quarter, these companies collectively spent approximately 500 million yuan ($70.2 million) to promote AI applications, with Alibaba committing 200 million yuan specifically to enhance its Quark cloud storage and search platform.

While Alibaba is keen on expanding its AI reach, the company is focusing on building applications for enterprise use, steering away from creating a consumer AI chatbot similar to OpenAI's ChatGPT. Alibaba Cloud Intelligence Group reported a 7% growth in revenue, totaling $4.22 billion in the second quarter.

In the first half of 2024 alone, Alibaba, Tencent, and Baidu invested around $7 billion in AI infrastructure and processors, showcasing their commitment to advancing technology in this field.

Analyst Dan Ives from Wedbush anticipates that U.S. Big Tech companies, such as Meta Platforms, Microsoft, and Amazon, are projected to spend over $1 trillion on AI developments in the coming years.

Alibaba's stock has seen an increase of over 13% in the past year. Investors interested in gaining exposure to Alibaba shares can consider options like the Invesco Golden Dragon China ETF and the First Trust Nasdaq Artificial Intelligence and Robotics ETF.

Current Stock Performance: As of the latest update, BABA stock was down 1.04% at $83.91 in premarket trading.

Alibaba, AI, Market, Technology, Business