Alibaba and Baidu drastically reduce language model costs

Alibaba and Baidu drastically reduce language model costs
Alibaba and Baidu drastically reduce language model costs

Chinese tech giants Alibaba and Baidu have sparked a fierce price war in China’s cloud computing sector by significantly reducing the costs of their advanced language models (LLMs) used for generative artificial intelligence products. This strategy aims to attract more customers in an increasingly competitive market.

Massive discounts at Alibaba

Alibaba’s cloud unit has announced price cuts of up to 97% on a range of its Tongyi Qwen LLM models. For example, the Qwen-Long model, which initially cost 0.02 yuan per 1,000 tokens, will now only cost 0.0005 yuan per 1,000 tokens. This dramatic reduction aims to make AI more accessible and strengthen Alibaba’s position in the market.

Baidu’s immediate reaction

Hours after Alibaba’s announcement, Baidu responded by making its Ernie Speed ​​and Ernie Lite models free for all business users. The move marks an important step in the current price war, which sees major cloud computing players in China aggressively lowering their prices to attract customers and increase their market share.

A context of price war

The price war in the cloud computing sector in China has intensified for several months. Alibaba and Tencent have recently reduced prices on their cloud services, and many Chinese cloud providers have turned to AI chatbot services to boost sales. This trend was catalyzed by the global success of OpenAI’s ChatGPT in late 2022, pushing Chinese companies to invest heavily in large language models.

Obviously an impact on profit margins

Increased competition in the cloud computing space, now extended to large-language models, threatens to squeeze companies’ profit margins. Significant price reductions could make it difficult to monetize these expensive technologies, despite growing demand.

The market response…

Baidu was the first company in China to offer its LLM products to paying consumers, with pricing of 59 yuan per month for its advanced Ernie 4 model. Bytedance also responded by announcing that the price of its Doubao LLM model would be 99 lower .3% to the industry average for professional users.

Additionally, startups like Moonshot are exploring new monetization strategies, such as paid prioritization features for business and individual users of their chatbot services.

The price war in China’s cloud computing sector, exacerbated by drastic price cuts for advanced language models by Alibaba and Baidu, illustrates the intense competition in this growing field. As companies seek to attract new customers and increase market share, they must also find innovative ways to maintain profit margins in an environment of plummeting prices.

The dynamics of this price war could redefine the cloud computing and artificial intelligence landscape in China for years to come.

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