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Amazon Web Services, the e-commerce firm’s cloud arm, is, however, larger than its Chinese rival. AWS raked in $6.68 billion in sales in the third quarter.
Amazon’s success may bode well for Alibaba: “At present cloud services in Alibaba are in investment mode, and are not profitable. As their cloud services build scale they have the potential to become a profit powerhouse for the company, just as AWS is at Amazon,” Garner said.
Alibaba is looking to cloud computing as a way to diversify its business beyond retail — much as Amazon did more than a decade ago. Meanwhile, Alibaba is also pushing a strategy it calls “New Retail,” which is where it tries to combine its online properties with brick-and-mortar stores. That includes food delivery and also its own logistics network.
The company also announced plans earlier this year to design its own artificial intelligence chips. Those are to go into servers that handle huge amounts of data and could help Alibaba as it tries to boost its cloud division.
“A chip is the core of the computing power. So if you want to plug AI into the business … it’s all about computing power … so that’s why I think we have to spend time on chips,” Zhang told CNBC.
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