Alibaba Spurs Price War in Cloud Computing With Steep Cuts

(Bloomberg) -- JD.com took less than a day to respond to Alibaba Group Holding’s price cuts in cloud computing services with its own sharp reductions, an aggressive round of competition that will benefit customers and erode profits at China’s leading technology companies.

Alibaba began slashing prices by as much as 55% on more than 100 services Thursday (February 29) in a bid to win back customers in the hotly contested market. JD.com, a rival in e-commerce and cloud services, responded later the same day with its own round of price cuts, unveiled on the company’s WeChat account. Alibaba’s stock fell as much as 1.9%, while JD was little changed.

The moves by Alibaba mark one of its more aggressive bids to fend off competition from the likes of Tencent Holdings, Baidu, and JD.com. Alibaba had planned to spin off its cloud business into an independent, publicly traded unit, but called off the split last year in a reversal that stunned investors. 

The company is now focusing on growing the public cloud – the domestic services arm aimed at enterprise customers – given US sanctions curtailing the supply of advanced chips to Chinese firms. Chief Executive Officer Eddie Wu, who took the helm last year, has taken direct control of the unit and revamped major lines.

Related:Alibaba Begins Cloud Division Overhaul After Scrapping Spinoff

Alibaba has struggled over the past year to revamp its vast e-commerce, logistics, and cloud empire in the face of fierce competition and geopolitical risks. The company is looking to revive growth after two years of regulatory scrutiny and Covid-era economic turbulence. It seeks to hive off non-core assets to raise capital, while dividing its sprawling operations into more clearly defined areas.

But the cloud – the business spawned over a decade ago from the need to support a mammoth e-commerce operation – remains a focal point, particularly as demand for computing power rises alongside a surge in AI development. Yet in recent years, it’s shed clients to not just its usual rivals but also state-backed entrants and relative newcomers like Huawei Technologies Co.

Now Alibaba may have galvanized the competition. In its post on Thursday, JD declared its intent to compete, though with few specifics.

“Cut all you like, let’s fight to the end!” the company proclaimed in a big banner-like declaration.