Alibaba Cloud plans to use fewer Western chips, to boost its already huge AI margins

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  "company": {
    "name": "Alibaba Cloud",
    "domain": "alibabacloud.com"
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  "data": {
    "url": "https://www.theregister.com/off-prem/2026/08/21/alibaba-cloud-plans-to-use-fewer-western-chips-to-boost-its-already-huge-ai-margins/5290815",
    "title": "Alibaba Cloud plans to use fewer Western chips, to boost its already huge AI margins",
    "excerpt": "off-prem Cloudy AI is Chinese giant’s ‘most certain’ path to growth as e-commerce slows Alibaba has revealed margins from its cloudy AI operation are rising so quickly it will be able to achieve return on investment for new hardware purchases faster than previously planned. Speaking on the company’s earnings call yesterday, CFO Toby Xu said the company runs its servers for five years, and that AI servers produce enough revenue to cover their costs in three years. In the fourth and fifth years of a server’s life, the machines therefore generate free cash flow. CEO Eddie Wu said some servers deliver cash for longer, and said machines acquired in 2018 and 2020 – and packing the Nvidia V100 and A100 accelerators – “are still being used by customers at near full capacity.” Alibaba thinks it can shorten the initial payback period for AI hardware to 2.5 years, because margins for AI services are increasing. One way the company makes that possible is by using more of its own chips. “Self-developed chips are a long-term and important direction for us,” Wu said. “As the production capacity of our self-developed chips continues to increase, the proportion of self-developed chips in our data centers will continue to rise, replacing more commercially purchased chips.” “We know that in this era of scarce computing power, commercial chips already have very high gross margins, so a...",
    "summary": "Alibaba Cloud reported quarterly revenue of $7.14 billion, with its AI offerings growing 45 percent.",
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    "image_url": "https://image.theregister.com/259127.jpg?imageId=259127&x=0&y=0&cropw=100&croph=100&panox=0&panoy=0&panow=100&panoh=100&width=1200&height=683",
    "confidence": 0.9,
    "published_at": "2026-08-21T04:38:53Z",
    "article_sentence": "With its 45 percent growth, Alibaba Cloud’s AI offerings did far better, but its quarterly revenue of $7.14 billion is well behind AWS, Microsoft, and Google.",
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