China’s Alibaba Cloud can’t deploy servers fast enough to keep up with demand for AI, so is rationing access to GPUs so that customers who use all of its services enjoy priority access.
Speaking on Alibaba Group’s Q2 earnings call, CEO Yongming Wu said “demand for AI is accelerating” and also deepening due to demand “from all aspects of enterprise operations … with applications across product development, throughout manufacturing processes, and also in terms of supporting enterprises and customers [to] use their products.”
“We’re not even able to keep pace with the growth in customer demand, in terms of the pace at which we can deploy new servers,” he added.
Demand is so strong that Alibaba is rationing its GPUs to prioritize the needs of its best customers.
“If an external customer is utilizing all of our services across cloud, all of Alibaba Cloud services spanning storage, spanning big data, and all of these other things, then of course that customer would be accorded a higher level of priority,” he said. “If you have a customer that’s merely renting a GPU to meet some very simple inferencing needs, then the demands of those customers would accordingly be given a slightly lower level of priority.”
Wu also addressed – and dismissed – concerns that AI is an investment bubble. He offered two reasons for that assessment, one of which was that Alibaba is already running its GPUs at full utilization – both its latest models and kit that’s between three and five years old – which suggests demand is already strong.
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Alibaba execs didn’t say if its infrastructure issues relate to US bans on sales of advanced accelerators to China. The company did reveal it made RMB 120 billion (US $16 billion) AI-adjacent capital expenditure over the last 12 months – less than what the likes of Google, AWS, Microsoft, and Meta current spend each quarter – and suspects it will need to revise its planned three-year spend beyond its current RMB 380 billion ($53 billion) budget.
The second reason is his belief that the best of AI is yet to come, and that as Alibaba improves its foundation models new use cases will emerge that will see customers spend more.
Revenue for Alibaba’s Cloud Intelligence unit reached $5.6 billion for the quarter, up 34 percent year-over-year. Alibaba Group revenue hit $34.8 billion for the quarter, with net income of $2.95 billion. The company’s overseas operations recorded their first profit. ®
