Alibaba to invest $28 bn in cloud business after coronavirus lifts demand

Alibaba Group said it will invest 200 billion yuan or $28 billion in its cloud infrastructure over three years.
Alibaba Cloud IndiaThe China-based company said it will spend the funds on semiconductor and operating system development as well as building out its data centre infrastructure.

The investment plan follows a boom in demand for business software as the coronavirus outbreak peaked in China. While most of China’s white collar employees were working from home throughout February, the country’s dominant cloud player saw usage surge for its software, most notably DingTalk, a workplace chat app used by both businesses and schools, Reuters reported.

Alibaba Cloud Intelligence president Jeff Zhang said in the statement that the COVID-19 pandemic has posed additional stress on the overall economy across sectors and the company hoped the investment would help businesses speed up the recovery process.

Alibaba’s cloud division is one of its fastest growing businesses. Alibaba’s cloud business  said its revenue climbed 62 percent to 10.7 billion yuan in the fourth-quarter, the first time it has topped 10 billion yuan in a single quarter.

The tech giant commanded 46.4 percent of China’s cloud market in the fourth quarter, according to research firm Canalys. Tencent Cloud and Baidu Cloud, which have also seen demand for their products surge, had 18 percent and 8.8 percent of the market respectively.

During the first quarter, Alibaba’s cloud unit also aided the Hangzhou government in creating and rolling out a digital health-monitoring system that rates one’s exposure to the virus using red, yellow, and green colour codes. The system was later rolled out nationwide.

Alibaba Group Holding earlier warned of a drop in revenues at its key e-commerce businesses during the March quarter as the coronavirus sweeping China hits supply chains and deliveries. Sales in Alibaba’s core commerce business jumped 38 percent to 141.48 billion yuan in its third quarter ended Dec. 31.
Hyperscale operator CapexHyperscale operator Capex

Hyperscale operator Capex in the fourth quarter has touched over $32 billion, Synergy Research Group earlier said.

For the full year, total hyperscale operator Capex was up just 1 percent from the prior year. However, their Capex that was specifically targeted at data centers increased substantially, growing by 11 percent in 2019.

The top five hyperscale spenders in 2019 were Amazon, Google, Microsoft, Facebook and Apple. Other leading hyperscale spenders include Alibaba, Tencent, IBM, JD.com, Baidu and Oracle.

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