Alibaba says its AI spending in e-commerce business is already breaking even

In a significant development for the e-commerce sector, Alibaba announced that its investments in artificial intelligence are already yielding positive results. During a press briefing, Kaifu Zhang, vice president of Alibaba, revealed that the company is seeing a return on its AI spending for its e-commerce operations. Despite widespread skepticism regarding excessive spending on AI technology, Alibaba remains optimistic. The company recently committed to an additional investment in AI and cloud infrastructure, following a February announcement of a staggering 380 billion yuan ($53 billion) budget over three years. Zhang, who leads AI initiatives for e-commerce, detailed the company’s deployment of various AI tools aimed at enhancing user experiences, such as personalized search results and more precise virtual try-on features for clothing. This announcement coincides with Alibaba's kickoff of presales for Singles Day, the largest shopping event in China comparable to Black Friday. Zhang highlighted that initial tests have demonstrated notable effectiveness from AI, achieving a 12% increase in returns on advertising spend—a remarkable outcome in such evaluations. Looking ahead to the Singles Day shopping event on November 11, Zhang anticipates that AI integration will significantly boost Alibaba's gross merchandise volume. The company’s e-commerce division continues to be its primary revenue generator, reporting a 10% year-over-year growth to approximately $19.53 billion for the quarter ending June 30. Even amidst a challenging landscape for Chinese consumer spending in recent years, last year's Singles Day saw Alibaba's Tmall, JD.com, and PDD collectively achieve a 20.1% growth in sales, reaching 1.11 trillion yuan. In a recent earnings call, Alibaba's leadership framed AI and consumption as crucial opportunities for growth, expressing commitment to making historic investments. CFO Toby Xu emphasized the importance of these investments over immediate profit margins, stating, "For now, we may place relatively less emphasis on profit margins. But that does not mean that we don't care about margins."