Alibaba and Tencent, two of China’s tech giants, have released their latest financial reports, revealing that the rapid spread of artificial intelligence (AI) technology is facing challenges in revenue generation within the Chinese domestic market. Against the backdrop of weak consumer demand and the U.S.-China trade war, the uncertain prospects for investment returns in the AI field are highlighting the pains of industry growth.
On Thursday, May 15th, Alibaba Group’s CEO Daniel Zhang, in a conference call with analysts, stated that AI applications have expanded across various industries, but Alibaba’s revenues still fall below expectations.
Despite Alibaba’s extensive focus on AI this year and becoming one of the most aggressive investors, with almost weekly announcements and product updates, they have encountered headwinds: Chinese consumers are hesitant to pay for AI services.
Analysts are more focused on the fiercely competitive e-commerce business rather than the expansion of AI. The trade war and economic slowdown further cast shadows over the ambitions of Chinese tech companies.
Tencent Holdings’ financial report was supported by its flagship gaming division, yet CEO Ma Huateng expressed that in the field of AI, they are still in uncharted territory. This sentiment holds true not only for Tencent but for global AI deployment as a whole.
He admitted that domestic software services struggle to charge fees, with prevalent free AI application models. Tencent believes that the subscription payment model is challenging to popularize in China, necessitating the exploration of new monetization approaches to generate revenue.
In recent years, Chinese tech firms have made significant investments in the AI field, aiming to catch up with Silicon Valley in the U.S. Alibaba significantly increased its AI research and development expenditure in 2024, while Tencent integrated AI technology into its advertising and cloud services.
However, with a saturated domestic market and intense competition forcing companies to lower prices, coupled with unclear profit models, Chinese enterprises are finding it challenging to replicate the profit-generating methods of overseas entities like OpenAI’s ChatGPT that cater to paying users.