Alibaba founder Joe Tsai says China’s AI market is facing a different obstacle, and he’s not referring to model quality or power constraints.
Speaking at the World Government Summit in Dubai, the billionaire says the companies best positioned to monetize AI are those that control both the models and the cloud infrastructure they run on.
While companies like Google and Alibaba don’t make money from open-source model downloads, Tsai says they can monetize their cloud infrastructure by charging users for GPU/TPU time, inference requests and fine-tuning workloads, among other things.
“The companies that actually have a cloud infrastructure, for example, in the United States, you have Google that has a full stack of the model and the cloud infrastructure. They also have chips, can monetize in other ways from the usage of the open-source model. If you look at China, look at the example of Alibaba, our Qwen model is open source, but we also run our cloud business.
And today, we’re monetizing because people are training and also running inference on their models on our infrastructure, and thereby generating the economics.”
Tsai says the uncertainty lies in consumer behavior, particularly in China’s highly price-sensitive market. He notes that open-source models remove pricing power because they’re free, ultimately leaving standalone AI model startups struggling to get direct consumer subscriptions.
“But I think it remains to be seen how, in the future, you can get, especially consumers, to pay for a monthly subscription and generate economics there. That remains to be seen. That’s the biggest challenge in the Chinese market.”
In November, MIT published a study that found China’s share of open-source model downloads has surged to 17.1%, led by DeepSeek and Qwen. In contrast, the USA’s share dropped to 15.8%.
While the strategy is designed to accelerate innovation and circumvent US tech restrictions, it appears to be a limiting factor in the growth of the Chinese AI market.
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.