Alibaba Cloud shifts to home-grown chips to lift AI profit margins

Alibaba Cloud reported that AI services are generating margins fast enough to cover server expenses in three years, after which the hardware yields free cash flow. CFO Toby Xu highlighted a five-year server lifespan, while CEO Eddie Wu noted that 2018 and 2020 Nvidia V100 and A100 servers continue to operate at high utilization. The company is accelerating the use of its own chips, expecting the proportion of self-developed silicon in data centres to rise as production scales.

More than 650 outside clients now run workloads on Alibaba-designed processors, a modest figure compared with rivals. AI spending surged, with $10 billion allocated to infrastructure, and executives view AI as the most reliable growth source as e-commerce revenue slows.