Inside Alibaba's latest cloud strategy

This year Alibaba, the Chinese tech giant, went through a bunch of changes.

Inside Alibaba's latest cloud strategy
3D printed clouds and figurines are seen in front of the Alibaba Cloud service logo in this illustration taken February 8, 2022. REUTERS/Dado Ruvic/File Photo

The backstory: This year Alibaba, the Chinese tech giant, went through a bunch of changes. March marked a pivotal moment as the e-commerce giant executed its biggest restructuring in 24 years. It split into six units, each with its own CEO and board of directors, leaving them free to consider public listings or fundraise. After this, in June, Eddie Wu took over as CEO, succeeding Daniel Zhang, who redirected his focus toward Alibaba's cloud division and a newly established investment fund. 

Adding an extra layer of intrigue to Alibaba's strategic moves, analysts in March estimated the Cloud Intelligence Group's value to be between US$41 billion and US$60 billion. Then Joseph Tsai, Alibaba’s chairman, said last month that the cloud unit hosts half of China's generative artificial intelligence (AI) firms and caters to about 80% of the country's tech companies. 

More recently: Alibaba had planned a spin-off of its Cloud Intelligence Group, but then it recently called off the whole thing. The company said this decision was mainly because of the impact of US tech curbs on advanced chips exported to Chinese companies. The decision spooked investors and led to a US$24 billion selloff over two days.

Now, instead of going forward with the spin-off, Tsai said the company is changing its strategy. Alibaba wants to focus on steady growth by providing cloud computing services that use AI. 

The development: Alibaba is now reportedly shuffling its leadership to kickstart growth and ride the AI wave. According to insiders, Alibaba Cloud Intelligence has put three new executives in charge. Two of them report directly to CEO Wu. The spotlight is all on the domestic cloud services arm, aka the public cloud, designed for business customers in China. Liu Weiguang is leading the charge to win back market share lost to government-backed rivals, according to anonymous insiders. 

Key comments: 

“Instead, we will focus on developing a sustainable growth model based on emerging AI-driven demand for networked and highly scaled cloud computing services,” said Alibaba chairman Joe Tsai. 

“The recent expansion of US restrictions on export of advanced computing chips has created uncertainties for the prospects of Cloud Intelligence Group,” said Alibaba in a statement, referring to the cancellation of the spinoff. “Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under the fluid circumstances.”

“As the penetration rate of Internet users reaches a ceiling, the driver of growth in this sector will be technology, especially AI,” said CEO Eddie Wu.