RPT-BREAKINGVIEWS-Alibaba shakeup hints at an AI business model

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.

By Robyn Mak

HONG KONG, March 17 (Reuters Breakingviews) - How do you make money from artificial intelligence? The question has plagued both U.S. and Chinese technology giants from OpenAI to Alibaba 9988.HK. But there are signs that the $325 billion e-commerce giant and compatriots in the People's Republic have a glimmer of an answer.

Alibaba on Monday announced it is separating its AI businesses from its cloud computing arm. That implies it will no longer focus on bundling a full technology stack, from cloud infrastructure to foundational models to applications and software, for enterprises. Just as well. That strategy has disappointed in part due to Chinese firms' reluctance to spend heavily on IT services. Sales from the cloud division are forecast to hit 156 billion yuan, or $23 billion, in the fiscal year to March 2026, per Visible Alpha, up an impressive 32% but still below OpenAI's mooted annualised revenue as of February.

Wu's newly-formed Alibaba Token Hub Business Group will be better placed to tap into the country's recent craze for digital assistants that can manage emails and calendars, among other tasks. The viral popularity of OpenClaw, an ​open-source agent that anyone can ⁠install on their devices and grant broad access to, has prompted Alibaba, Tencent 0700.HK and other rivals to launch their own versions for consumers and businesses.

Digital assistants are powered by AI models that consume tokens. Unlike chatbots, OpenClaw and its ilk are continuously making decisions and executing tasks 24/7; an OpenClaw agent consumes tens to hundreds of times more tokens a day than a chat session, estimates Poe Zhao, a China tech analyst and founder of Hello China Tech. Users can decide which models to run their agents on.

That has changed the economics of consumer AI, which largely relied on charging subscriptions for chatbots – a strategy that never took off in China, where people are generally used to free or low-cost apps. Agents may change that. Upstart MiniMax 0100.HK, for instance, whose low-cost models have attracted many OpenClaw users, said its annual recurring revenue for February topped $150 million, nearly double its 2025 sales, and that average daily token consumption of its flagship model has grown sixfold compared to December. That signals consumers and companies are at least willing to pay for tokens.

The next step for Alibaba – which has its own digital assistants and models – and for its peers is to cut the cost of tokens to drive and sustain mass adoption. Here, China already has an advantage over the U.S., with lower electricity prices, cheaper domestic chips and optimised algorithms. The challenges of monetising AI remain daunting, but Alibaba is taking a small step to establishing a business model.

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CONTEXT NEWS

Alibaba on March 16 announced the establishment of the Alibaba Token Hub Business Group to be led by CEO Eddie Wu. The new unit comprises Alibaba's enterprise and consumer AI divisions, and its stated mission is to "create tokens, deliver tokens and apply tokens".

The company on March 17 also launched an AI platform for businesses. Called Wukong, it can coordinate multiple AI agents to handle complex business tasks, including document editing, spreadsheet updates, meeting transcription and research within a single interface.

Alibaba's Hong Kong stock was up 2.5%, to HK$137.50, in late-morning trading on March 17.

(Editing by Una Galani; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on MAK/ robyn.mak@thomsonreuters.com))