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Alibaba plans to spend $53 billion on AI in a major pivot

(Bloomberg) — Alibaba Group Holding Ltd. (BABA, 9988.HK) pledged to invest more than 380 billion yuan ($53 billion) on AI infrastructure such as data centers over the next three years, a major commitment that underscores the e-commerce pioneer’s ambitions of becoming a leader in artificial intelligence.

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The internet company co-founded by Jack Ma plans to spend more on its AI and cloud computing network than it has over the past decade. Alibaba envisions becoming a key partner to companies developing and applying AI to the real world as models evolve and need increasing amounts of computing power, the company said on its official blog.

That target marks one of China’s biggest AI infrastructure budgets, underscoring Alibaba’s growing ambitions in the field. But it comes at a time investors are pondering whether big tech firms are overestimating future demand for AI services, or the capital needed to create them.

TD Cowen analysts pointed out Friday that Microsoft Corp. (MSFT) is canceling leases for a substantial amount of data center capacity in the US — a move that may reflect concerns about whether it’s building more AI computing than it will need over the long term. Alibaba’s Hong Kong shares slid as much as 3% on Monday.

“This also sets a record for the largest investment ever by Chinese private enterprises in the field of cloud and AI hardware infrastructure construction,” Citigroup analyst Alicia Yap wrote, adding that the amount surpassed her own estimates by about 30 billion yuan.

Big tech firms from Meta Platforms Inc. (META) to Amazon.com Inc. (AMZN) are pledging billions toward the data centers needed to train, develop and host AI services.

Wall Street has begun to question whether such investment is running ahead of reality, particularly after Chinese upstart DeepSeek unveiled a model trained for a fraction of the cost of many of its rivals. But many of the industry’s biggest names — including Nvidia Corp.’s (NVDA) Jensen Huang — continue to argue that AI will simply transform the tech landscape.

Alibaba certainly falls in that camp. The Chinese company is now righting a business knocked off-kilter by a government clampdown that began in 2020, refocusing its ambitions on e-commerce and AI. Last week, Chief Executive Officer Eddie Wu declared that Artificial General Intelligence was now its primary objective, joining a race so far led by the likes of OpenAI and big US firms like Alphabet Inc. (GOOG, GOOGL)

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