🧠 Food for thought

Implications, context, and why it matters.

The AI sell-off meets a domestic cloud price war

• Share declines are landing on a Chinese software sector under strain from a local price fight, as large cloud providers cut rates by as much as 50% 1.
• China’s cloud market works differently than the US. It leans heavily on low-margin infrastructure-as-a-service (IaaS), and IaaS made up more than 75% of the market in Q1 2023 2.
• Large Chinese companies often choose custom in-house systems over standardized software-as-a-service (SaaS) products. That has kept SaaS growth in check 3.
• These forces keep big tech firms on top. Alibaba Cloud took 35.8% of China’s AI cloud services market in the first half of the year, according to Omdia (a technology research firm) 4.

Domestic AI fears could speed up a global cloud showdown

• AI anxiety has spooked investors. AI also fuels growth for China’s largest cloud providers.
• Alibaba Cloud, the group’s fastest-growing unit, says its open-source Qwen models (a family of AI models) are bringing more customers to Alibaba Cloud, supported by rising demand for training and inference 4.
• The price war at home is thinning margins. That pressure is pushing Alibaba, Tencent, and Huawei to hunt for higher-return growth in Southeast Asia and the Middle East 5.
• Overseas moves may carry China’s cloud rivalry into other regions, as some firms pitch themselves as lower-cost options versus US competitors in places like Southeast Asia 2.