Amazon and Alibaba Bet Big on Artificial Intelligence: Which Approach Will Pay Off?
Amazon and Alibaba are both making significant bets on artificial intelligence (AI), but they're taking different approaches. While Amazon's AI investment is already showing up in its numbers, Alibaba's full-stack approach could potentially give it more control over the technology needed to compete in the global AI race.
Amazon's AWS revenue jumped by 37% year-over-year in the second quarter to $42.2 billion, with its AI business within AWS surpassing an annual run rate of $25 billion. However, Amazon's heavy AI spending has pushed free cash flow into negative territory, and management expects capital expenditures to reach around $220 billion by 2026.
Alibaba, on the other hand, is investing aggressively in AI, with its AI Cloud and Compute Services business growing 45% year-over-year in the June quarter to roughly $7.1 billion. The company's new AI chip is expected to enter mass production in 2027, and it plans for a next-generation model with up to 10 trillion parameters.
The market is valuing Amazon at a premium to Alibaba, but Alibaba's earnings growth is expected to accelerate sharply from its current base. However, the company's traditional e-commerce business remains under pressure, and its AI businesses are still scaling.