- Alibaba Group Holding has slashed prices for several artificial intelligence services by up to 97%, triggering a swift response from Baidu and potentially sparking a price war in China's emerging AI market. Baidu Cloud announced free services based on its Ernie AI models shortly after Alibaba offered deals on nine products built on its Tongyi Qianwen application. This follows ByteDance’s announcement of AI service pricing 99% lower than industry norms, using Ernie and Alibaba’s Qwen as benchmarks.
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These price cuts signal the start of a competitive battle within the AI field, which is attracting billions in investments from startups and tech giants like Tencent Holdings. The surge in investment has led to the creation of numerous AI models and a variety of consumer and enterprise products, all vying for the user base needed to accelerate AI development. This pricing strategy is reminiscent of how China’s tech companies have used discounts to dominate markets like e-commerce, food delivery, and ride-hailing.
Why it matters
Alibaba's decision to cut prices on its Large Language Models (LLM) by up to 97% is likely to further disrupt China’s AI market and push the sector into a price war. This move is seen as a response to ByteDance's recently launched Doubao LLMs, which were priced significantly below market rates. Shares in Alibaba fell 1%, while Baidu's dropped nearly 4% in Hong Kong.
