Alibaba bets on AI to fuel cloud growth as it expands globally to catch up with U.S. tech giants

Alibaba is operating in Suqian City, Jiangsu Province, China, on December 29, 2023.Costfoto | Nurphoto | Getty Images

Alibaba on Thursday said it expanded its global cloud computing availability, while the head of the unit's international arm touted the company's AI products as a way to fuel growth.

The Chinese technology giant said it has expanded the availability zone of its cloud computing products to Mexico for the first time, and that it will build new data centers in key markets including Malaysia, Thailand and South Korea over the next three years.

"We want to have ... more efforts and investments for our international data centers," Selina Yuan, President of Alibaba Cloud's international division, told CNBC in an interview on Wednesday.

The push for growth follows a turbulent time for Alibaba Cloud, after the division scrapped a planned initial public offering and underwent a management reshuffle.

Alibaba's cloud division began to expand internationally in 2015 with so-far mixed results. Amazon, Microsoft and Alphabet-owned Google account for around 67% of global cloud market share, according to Synergy Research Group. Alibaba takes up just under 5% of that space.

In China however, Alibaba accounts for 39% of the market, according to data from Canalys — and the company is one of the top players in Asia.

The cloud unit was seen as a critical future business for Alibaba by previous CEO Daniel Zhang and current senior management. But growth has slowed significantly in recent quarters. This month, Alibaba executives said during an earnings call that the cloud division would return to "double-digit growth" in the second half of the current fiscal year.

To reignite that momentum, Alibaba is betting on its AI products and on signing up more customers. On Wednesday, Alibaba expanded its partnership with French luxury house LVMH, which has begun using the Chinese tech giant's AI tools in China.

Alibaba launched its large language model (LLM) — a type of software trained on vast amounts of data that can underpin artificial intelligence applications — Tongyi Qianwen in 2023. The Chinese company this month rolled out a more advanced version of the model, as it looks to keep up pace with other Chinese rivals like Baidu and Tencent, as well as with U.S. tech giants Microsoft, OpenAI and Google.

Senior management at Alibaba, including CEO Eddie Wu, have talked up the company's potential in AI. Like Microsoft and Google, Alibaba sells its AI products via its cloud division.

"We think AI is the future, is definitely the trend, and how (do) we support the AI and large language model? Cloud computing," Yuan told CNBC.

"We think is really the good time for the Alibaba cloud. We have cloud computing ... we have our very clear strategy. We have our large language model, and I think we can do more for the business, for our customer and partners."