Alibaba Group's stock experienced a pre-market plummet of 7.81% on Tuesday, following the company's announcement to invest a staggering $53 billion (380 billion yuan) in artificial intelligence (AI) and cloud computing infrastructure over the next three years.
While Alibaba's AI and cloud initiatives have fueled recent growth, with its Cloud Intelligence Group revenue rising 13% year-over-year in the latest quarter, investors are wary of the potential impact of such massive spending on the company's bottom line. The investment represents a substantial increase from Alibaba's total AI and cloud spending over the past decade.
Concerns around ballooning AI costs have been heightened by the recent release of DeepSeek-R1, a powerful AI model developed by a Chinese startup at a fraction of the cost of OpenAI's ChatGPT. Investors are scrutinizing companies' AI spending plans and questioning the potential returns, leading to a sell-off in Alibaba shares.
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