($) China Cloud Price War
And what it could mean for the global AI market
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There is a fierce price war going on among China’s major cloud platforms.
Alibaba Cloud, the market’s leader, fired the first shot in March by cutting the prices of over 100 different cloud services by up to 55% for its China customers. A month later, it expanded the same cuts to all of its data centers outside China for its overseas customers. And earlier this month, it cut the price again, this time for its in-house foundation AI model, Qwen, by as much as 97%!
This rapid, one-cut-per-month pace was either immediately followed by or preceded by its other competitors – Tencent, Baidu, JD, ByteDance, you name it. (Baidu’s response is actually to make two of its smaller Ernie models free, the biggest “price cut" of them all.) The only major competitor that hasn’t followed suit yet is Huawei Cloud, which may have something to do with its unique history and strengths in private cloud.
There is a lot to learn from this intensifying price war, whether you are only interested in the China cloud market or where the global cloud computing trend is going, especially as AI adoption becomes the tip of the spear. First of its kind in any major cloud market, this price war is the result of both the hypercompetitive yet somewhat self-contained nature of cloud in China, and the basics of cloud economics at scale, regardless of whether you operate a fleet of data centers in Beijing, Virginia, or Frankfurt, as generative AI becomes the singular driver of more cloud compute.
Let’s dig into each of these two dimensions.