Alibaba’s CEO dismissed talk of an AI bubble and said the company is doubling its spending.
The Chinese tech giant’s CEO Eddie Wu said during Alibaba’s second-quarter earnings conference on Tuesday that the company “doesn’t see much of a problem with the so-called AI bubble.”
“We haven’t even been able to keep up with the increase in customer demand,” Wu said, adding that Alibaba is not deploying new servers at a fast enough pace.
“AI resources will continue to be available for the next three years,” he said.
Wu said the surge in demand is not coming from hype, but from real-world AI adoption across the economy, including product development, manufacturing processes, and supporting companies.
He said Alibaba’s Qwen app, which was launched just last week, exceeded 10 million downloads in the first week.
On Tuesday, Alibaba Group posted 247.8 billion yuan. Revenue for the quarter ended Sept. 30 was $34.8 billion, up 5% from a year ago.
Profits were hit by heavy spending on AI and commerce. Net profit decreased 53% year-on-year to 20.6 billion yuan due to a “decrease in operating income.” Sales and marketing expenses have skyrocketed, more than doubling from a year ago.
The company’s cloud division, which includes Alibaba’s Qwen platform, led the company’s growth. The cloud business grew 34% to 39.8 billion yuan, driven by “increased public cloud revenue, including increased adoption of AI-related products.”
Wu said on the conference call that the company plans to “aggressively” invest in AI infrastructure to meet demand.
Alibaba announced in February that it would invest 380 billion yuan in AI infrastructure over the next three years.
“In the grand scheme of things, the 380 billion figure we mentioned earlier may be on the smaller side,” Wu said on Tuesday.
AI bubble chat
Wu’s comments contrast with those of Alibaba Chairman Joe Tsai.
At the HSBC Global Investment Summit in March, Tsai pointed to the rush to build data centers and said, “We are beginning to see the beginnings of a kind of bubble.”
Big tech companies like Microsoft, Amazon, Google, and Meta are expected to spend a combined $320 billion in capital spending this year as they rush to expand their AI infrastructure.
The AI bubble debate has divided technology leaders across the industry.
Some executives reject the idea that the AI boom is heating up. Last week, Nvidia CEO Jensen Huang dismissed concerns of an AI bubble during the company’s latest earnings call.
“People talk a lot about the AI bubble,” Huang said. “From our perspective, we see something completely different.”
Some people are being more cautious. OpenAI CEO Sam Altman said in August that investor enthusiasm was ahead of reality.
“Are we at a stage where investors as a whole are getting too excited about AI? My opinion is yes. Is AI the most important thing that’s going to happen for a very long time? My opinion is also yes.”
