Alibaba slashes overseas cloud prices

Alibaba (9988) is cutting prices for cloud customers from the US to Singapore by as much as 59 percent, mirroring deep discounts at home as the once high-flying division struggles to fend off rivals and revive growth.

The move coincides with a surge in demand for cloud computing to support a global boom in artificial intelligence development, as well as a complicated internal restructuring. Chief executive Eddie Wu is spearheading a far-reaching overhaul to try and revitalize Alibaba’s main businesses including ecommerce.

Alibaba canceled plans for a public listing of the cloud business in November, citing difficulties getting the high-end Nvidia chips it needs to compete, and has faced rising competition from Tencent (0700) and state-backed providers.

The Hangzhou-based firm slashed prices yesterday by an average of 23 percent for around 500 cloud product specifications. Those discounts are now available to customers in 13 regions, including Japan, Indonesia, the United Arab Emirates and Germany.

Its shares in Hong Kong pared gains after the announcement to trade about 0.5 percent up.

Alibaba is China’s biggest cloud service provider, but a relatively small player compared to global leaders Amazon and Microsoft. It has lost market share in China to state-backed rivals and struggled to gain any ground abroad in recent years as a crackdown on internet firms in China and US trade curbs hampered its expansion.

Revenue at the cloud division, which surpassed US$11 billion (HK$85.8 billion) in its last full fiscal year, is projected to slip 2 percent in the March quarter.

Chairman Joe Tsai acknowledged in an interview with major shareholder Norges Bank last week that US chip curbs posed a “big issue” for Chinese cloud providers.

While stockpiled inventories can still be used to train large language models for the next 12 to 18 months, limited access to Nvidia’s best-in-class AI hardware will impact the companies in the short to medium term before there are strong domestic alternatives, Tsai said.

The changes follow Alibaba’s domestic price cuts for more than 100 core cloud offerings by as much as 55 percent in February. Those spurred a price war, as rivals like JD.com (9618) responded with their own rounds of discounts.

February also marked Alibaba’s second major price cut in recent months.