- On Tuesday, Chinese tech titans Alibaba and Baidu embarked on an aggressive pricing strategy, slashing the costs of their large-language models (LLMs) used to power generative artificial intelligence products.
- The price cuts come as Chinese cloud vendors have increasingly relied on AI chatbot services to boost sales. This trend emerged after a wave of investment in large language models in China, spurred by the popularity of U.S.-based OpenAI’s ChatGPT.
- With Baidu, Alibaba, and other players engaging in aggressive pricing, the large-language models that power chatbots now face a threat to their profit margins.
Chinese tech giants Alibaba and Baidu slash prices on large-language models, igniting a price war in the cloud computing sector as they compete to boost AI chatbot sales.
Price cuts spark cloud computing war
On Tuesday, Chinese tech titans Alibaba and Baidu embarked on an aggressive pricing strategy, slashing the costs of their large-language models (LLMs) used to power generative artificial intelligence products. Alibaba’s cloud division announced reductions of up to 97% on select Tongyi Qwen LLMs, while Baidu followed suit, offering its Ernie Speed and Ernie Lite models free of charge to all business users. This move signals an intensifying price war in China’s cloud computing market, which has been heating up in recent months with Alibaba and Tencent also reducing cloud computing service prices.
Also read: What LLM does Perplexity AI use?
AI chatbots drive sales for cloud vendors
The price cuts come as Chinese cloud vendors have increasingly relied on AI chatbot services to boost sales. This trend emerged after a wave of investment in large language models in China, spurred by the popularity of U.S.-based OpenAI’s ChatGPT. Chinese LLM developers have focused on charging businesses to monetise their investments, but some have also begun targeting individual users. For instance, Chinese startup Moonshot recently introduced a tipping feature that allows both business and individual users to pay for prioritised access to its chatbot services.
Also read: How to create a large language model (LLM)?
Profit margins under threat in China’s AI space
With Baidu, Alibaba, and other players engaging in aggressive pricing, the large-language models that power chatbots now face a threat to their profit margins. Until recently, Baidu’s Ernie Lite and Ernie Speed models, released in March, had been available to corporate customers at a cost. However, the recent price cuts indicate a shift in strategy as companies seek to gain market share and boost sales through AI-driven services. The ongoing price war in China’s cloud computing space is likely to reshape the competitive landscape and potentially lead to further innovations in AI technology.
