(Bloomberg) — Alibaba Group Holding Ltd. slashed prices on a range of artificial intelligence services by as much as 97%, spurring an immediate response from Baidu Inc., potentially triggering a price war in the company’s nascent AI market. China.
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Baidu Cloud said it would offer free services based on its Ernie AI models on Tuesday, hours after Alibaba offered deals on nine products built on its own Tongyi Qianwen. last week announced prices for AI services that it said were 99% lower than Chinese industry standards, using Alibaba’s Ernie and Qwen as benchmarks.
The retaliatory maneuvers mark the start of a price-driven battle within AI, a field that is attracting billions of dollars in investment from startups and Internet leaders including Tencent Holdings Ltd. and has in turn spawned many more consumer products. and enterprise, all fighting for the critical mass of users needed to accelerate AI development.
China’s tech companies have relied heavily on discounts across markets for years, from e-commerce to food delivery to ride-hailing. Alibaba this year has spurred a series of price cuts on cloud computing, after offering discounts of up to 55% on more than 100 home services in March. This was followed on the same day by rounds of discounts from rival JD.com Inc.
What Bloomberg Intelligence says
Alibaba’s decision to reduce the prices of its Large Language Models (LLM) by up to 97% will likely further disrupt China’s AI market, pushing the sector into a price war. The move is likely a response to ByteDance’s recently launched Doubao LLMs, which were heavily discounted to the market. We expect Baidu, Tencent and JD.com to respond in due course.
– Robert Lea, BI Analyst
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Alibaba shares fell 1%, while Baidu fell close to 4% in Hong Kong.
Chinese tech pioneers have joined Silicon Valley peers such as Microsoft Corp. in making big bets on generative AI. In addition to developing their own in-house core models, they are investing hundreds of millions of dollars in emerging companies like Baichuan and Zhipu AI.
Alibaba has undergone a year of tumultuous restructuring to try to win back users for its cloud business, which also hosts its main AI effort. It surprised investors by canceling a planned spinoff of the arm into an independent, publicly traded unit.
The Hangzhou-based company – now under CEO Eddie Wu – has focused on growing its public cloud, the home services arm aimed at enterprise customers. It has undergone a major overhaul to stem market share losses to traditional rivals like Baidu and Tencent, as well as state-backed players and relative newcomers like Huawei Technologies Co.
Read more: TikTok Parent ByteDance now has China’s most popular AI chatbot
–With help from Gao Yuan.
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