Last Tuesday, December 31, Chinese technology and e-commerce giant Alibaba announced an up 85% price cut for its large language models.
Hangzhou-based Alibaba Cloud, a cloud computing unit, published a post on WeChat that contained information about cutting prices for its large language model called Qwen-VL. This virtual product was designed to perceive and understand both text materials and images.
Against the background of this news, the value of Alibaba shares did not show any significant changes. On Tuesday, the company’s securities rose 0.5% at the close of trading in Hong Kong.
The price cutting for large language models is a reflection of the increasing competition between Chinese technology companies. In this case, it implies rivalry for a large share of the Asian country’s artificial intelligence market. It is worth noting that increased competition is currently being observed throughout the global machine intelligence industry. The number of players and products is growing in this space. One of the forms of companies’ response to the relevant challenge is price cutting.
The largest Chinese technology firms, including Alibaba, Tencent, Baidu, JD.com, Huawei, and TikTok parent company Bytedance have launched their own large language models over the past 18 months. These business giants are seeking to capitalize on the so-called artificial intelligence boom.
It is worth noting that this is not the first time Alibaba has cut prices to encourage businesses to use its machine intelligence products. In February, the company cut prices by 55% on a wide range of its core cloud products. In May, Alibaba made its artificial intelligence model called Qwen more financially accessible. In this case, the price was cut by 97%. The company sought to stimulate consumer demand for the mentioned model of artificial intelligence.
Large language models are machine intelligence models that are trained on the basis of huge amounts of data to subsequently generate answers to user queries within the framework of a thinking paradigm similar to that which exists in the space of human consciousness. These digital products can also generate information and media materials based on consumer prompts.
Large language models are the bedrock for advanced generative artificial intelligence systems such as OpenAI’s ChatGPT.
It is worth noting separately that Alibaba is focusing its efforts on developing machine intelligence products in the enterprise segment. It is not a priority for the company to launch chatbots powered by artificial intelligence for mass consumer use. The corresponding priority is relevant for OpenAI. In May, Alibaba announced that its Qwen models had been deployed by more than 90,000 enterprise users.
Also on Wednesday, January 1, the mentioned company announced that it had agreed to sell its majority stake in the Sun Art Retail Group hypermarket chain to Chinese private equity firm DCP Capital. The cost of this deal will be $1.58 billion.
In a statement released by Alibaba, it was noted that the sale of the majority stake is a good opportunity to monetize non-core assets and use the proceeds to better focus on core businesses and increase shareholder return. The company currently considers artificial intelligence, global e-commerce, and Internet platforms driven by technology as its main areas of activity.
According to data contained in a filing to the Hong Kong Stock Exchange, 78.7% of Sun Art is held by Alibaba subsidiaries.
In 2020, Alibaba paid $3.6 billion for a controlling stake in Sun Art. In this case, the company sought to leverage its digital presence to support a chain of hundreds of hypermarkets.
It’s worth noting that last year, the value of Sun Art shares in Hong Kong increased by 85%. These rates of increase exceed the intensity of the upward dynamic of the main Hang Seng Index. The mentioned index grew by about 20%.
Alibaba is also selling its department store unit Intime. The company intends to implement this deal even if it has to face losses.
It’s worth noting that the stakes sale is part of Alibaba’s reshuffling business portfolio. The company is currently aiming to focus on core e-commerce operations.
Under new chief Eddie Wu, Alibaba invests in the most promising areas, including cloud technologies and online marketplaces. The company is also currently making efforts to expand its operations abroad. One example of such actions is the building of a joint venture in South Korea. Moreover, Alibaba is currently integrating its domestic and international e-commerce operations under the leadership of fast-rising executive Jiang Fan. At the same time, the company sells off holdings, which it does not identify as essential.
Alibaba has recently faced increased competition in the Chinese e-commerce sector. In the mentioned sector, Pinduoduo and Douyin lure customers with hefty discounts. This state of affairs in the e-commerce space has become a significant impact factor in the context of Alibaba’s restructuring decision. The example of the company is indicative as a confirmation of the thesis that changing the external conditions of activity may require transformation from a business, and ignoring the requirements of modernity is the beginning of the path to what can symbolically be called financial non-existence.
