Alibaba Announces Plans To Invest $53B In Infrastructure To Meet AI Demand
Alibaba’s data centre in Zhangjiakou, Hebei Province, China
Alibaba Group will invest more than RMB380 billion ($53 billion) over the next three-year period to develop its artificial intelligence and cloud computing infrastructure, marking the largest commitment by a Chinese company.
Chinese ecommerce giant announced its commitment to building out a digital backbone In a statement released on Mondayafter Alibaba Chief Executive Eddie Wu Yongming had made infrastructure a focus of his Friday speech, An investor earnings call
The AI era presents an obvious and massive demand for Infrastructure. Wu said during the call that we will aggressively invest into AI infrastructure. “Our planned investment in AI and cloud infrastructure over the next 3 years is set exceed what we spent over the last decade.”
Jack Ma’s tech firm, Alibaba Cloud, is laying out plans for infrastructure expansion. It has opened new data centres in Thailand this month and is ramping up the Alibaba Cloud platform in order to compete with Microsoft Azure as well as Amazon’s AWS.
Power Grid of Tomorrow.
As AI models evolve, an increasing share of AI-generated information will be processed and distributed through cloud networks. This trend positions Alibaba Cloud as the key infrastructure provider. A statement this week
Alibaba Group chief executive Eddie Wu Yongming
Describing AI as a “once-in-a-generation” opportunity, Wu said AI’s ability to mimic human levels of intelligence could affect or replace about 50 percent of global GDP, driving significant economic and technological shifts.
The firm has identified cloud computing as its most important revenue driver for AI, and the demand for AI hosting is surging. Wu said during the earnings call that cloud computing networks would become the equivalent to the power grid in the future.
The technology giant expects to use AI to improve efficiency and user engagement in its applications, such as its Taobao shopping app, smart-search app Quark, and workplace collaboration app DingTalk.
Alibaba’s announcement of its ambitions comes after the launch of their first data center in Mexico last week to provide cloud computing to businesses and developers throughout Latin America. Alibaba Cloud launched a second data center in Thailand earlier this month, as it promoted its upgraded suites of cloud applications for businesses.
Growing concerns about data sovereignty, and local regulatory requirements, had pushed Alibaba’s cloud computing arm’s investment priorities towards Southeast Asia and Mexico. The company announced last July that it planned to close its data centers in Sydney & Mumbai. Alibaba Cloud, which is similar to AWS, has public data centers located in London, Frankfurt and Silicon Valley as well as Southeast Asia and Mexico. Alibaba’s Cloud Intelligence Group’s revenue grew by 9 percent in the nine months that ended on 31 December, and accounted for 11.6% of the group’s overall revenue during the period. This is according to the latest quarterly report
.
The unit has as customers the luxury goods conglomerate LVMH, Singapore’s digital healthcare AI company FathomX, and Switzerland’s International Canoe Federation. Uncertainty about Future Demand
The same day Alibaba announced its AI ambitions Apple announced plans to invest $500 billion over the next 4 years
in initiatives including AI, silicon development and R&D, as well as a new 250,000 square-foot factory located in Houston, Texas.
These developments come at a moment when investors are beginning to wonder if big tech firms overestimate the future demand for AI.
TD Cowen analyst pointed out last week Microsoft appears to be recalibrating its data centre lease. TD Cowen channel checks indicate that the company has canceled contracts totaling several hundreds megawatts with “atleast two private data center operators” while also pulling back planned international investments. Microsoft had previously announced that it would spend $80 Billion on AI data centers this fiscal year.
This development comes just weeks after OpenAI in partnership with Softbank Oracle and Abu Dhabi based investment firm MGX launched the ambitious Stargate Project – a $500 billion joint project aimed at building AI infrastructure throughout the US over the next 4 years.
