Alibaba Group Holding, the e-commerce leader in China, has announced its decision to make its artificial intelligence (AI) model public, a significant milestone in the face of Beijing's tough regulations on technology companies. Although Alibaba's cloud division is not expected to offer a pure play on the hottest tech trend anytime soon, this move positions them alongside major US tech companies such as Meta Platforms (META).
Several organizations, including Zhejiang University, have already reached agreements with Alibaba to either train their own large language models or develop applications based on Alibaba's Tongyi Qianwen model. This announcement was made by the company via WeChat, stating that the large language model will be made publicly available for free commercial use by the entire society in the near future.
By gaining government approval for the release of their AI model, Alibaba not only indicates that the worst is over in terms of regulatory challenges, but also highlights Beijing's support for their AI initiatives. While Alibaba's core business remains in e-commerce, its cloud division, which houses their AI efforts, has been a significant source of growth in recent years. In fact, newly installed Alibaba CEO Eddie Wu emphasized that AI is one of the company's two main strategic priorities in a memo seen by 's.
Alibaba's Cloud and AI Business: A Plan on Hold
Alibaba, one of the tech giants in China, had previously announced its intention to split up its business, igniting excitement among investors. The prospect of investing directly in Alibaba's cloud and AI arm seemed promising, as it held the potential for a more favorable valuation than the company's core online retail business.
However, recent developments suggest that this plan may have lost momentum. While Alibaba confirmed its plans in May to spin off the cloud arm, progress has since slowed down. The slowdown is not surprising, considering the challenges faced by China's economy.
Anemic growth in the world's second-largest economy has sent shockwaves through global markets, and Alibaba's stock has not been immune. As the Chinese consumer weakens, Alibaba has had to make changes to protect its core business. This week, the company announced a shake-up in Alibaba Cloud management. Former CEO Daniel Zhang was expected to oversee Alibaba Cloud after stepping down from his leadership position. However, the recent shake-up revealed that the new CEO, Wu, would take charge of the cloud division as well. Unfortunately, this move does little to inspire confidence and fuel expectations for the cloud spinoff.
Despite the uncertainties surrounding the Chinese economy and capital markets, Alibaba asserts that it still intends to proceed with spinning off its cloud arm. Undoubtedly, this move would attract significant investor interest and potentially bolster shares in Alibaba. However, given the current circumstances, it seems unlikely that this high-growth tech play will occur anytime soon. Investors who hold Alibaba shares, which are currently trading around $100 (a price range not seen since 2017), will likely have to wait patiently for any significant developments.
In conclusion, the fate of Alibaba's cloud and AI business remains uncertain. Present conditions suggest that the company's plan for a split may have been put on hold. As with any major decision involving a tech giant, the timing and market conditions are crucial, and Alibaba's cloud spinoff is no exception.