(Bloomberg) — Alibaba Group Holding Ltd. Cuts Cloud Service Prices to Compete with Tencent and Baidu

Alibaba Group Holding Ltd. is rolling out its second major price cut for cloud services in years, aiming to win back users from rivals like Tencent Holdings Ltd. competing to provide the tools critical to training artificial intelligence.

Alibaba’s Latest Price Cut

The Chinese internet pioneer will slash prices starting Thursday on scores of internet-based services by as much as 55%, and by 20% on average. The discounts span more than 100 products, including data storage and elastic computing options for online processing power to clients, Alibaba executives told reporters in Beijing.

Competition in the Cloud Business

The cuts mark one of the more aggressive moves by Alibaba to stay ahead of Tencent and Baidu Inc. in the cloud business. They come after Alibaba called off a spinoff and initial public offering for the formerly fast-growing unit, a move that surprised investors hoping to buy into a key business that’s essential to AI development.

Focus on Public Cloud Services

It’s now focusing on growing the public cloud — the domestic services arm aimed at enterprise customers — given US sanctions curtailing the supply of advanced chips to Chinese firms. Chief Executive Officer Eddie Wu has taken direct control of the unit and revamped major lines.

Revamping Alibaba’s Business

Alibaba has struggled over the past year to revamp its vast e-commerce, logistics and cloud empire in the face of fierce competition and geopolitical risks. The company is looking to revive growth after two years of regulatory scrutiny and Covid-era economic turbulence.

Alibaba’s Strategy

The company announced cuts from 15% to 50% for core products of the Alibaba Cloud in April last year, in a move aimed at capitalizing on the demand for raw computing power needed for AI models. The previous round of discounts triggered fears that rivals like Tencent and Baidu will follow suit, eroding margins for a wide swath of the Chinese internet industry.

Attracting Customers

Thursday’s cuts will apply retroactively to clients that renew their orders on discounted products for at least a year within the next three months. The price cuts are also aimed at attracting longer-term customers, with special discounts for five-year plans.

Impact on the Industry

Alibaba executives stressed that the discounts will open up more possibilities particularly for smaller firms. The company has backed startups that are developing generative AI platforms to compete with sector leaders such as Baidu.