Chinese technology and telecom giants are aggressively expanding their artificial intelligence infrastructure, shifting their business models toward token-based services and enterprise cloud solutions. Alibaba's quarterly profit fell 75% due to a 75% surge in capital expenditure, even as its AI cloud revenue grew 45% to 48.44 billion yuan. Meanwhile, state-owned carriers China Telecom and China Unicom are capitalizing on soaring computing demand, launching token supermarkets and platforms hosting hundreds of large language models to drive double-digit revenue growth.
Alibaba AI infrastructure spending
- ▪Alibaba spent half of its planned 380 billion yuan ($56.4 billion) AI investment for 2026-2029 in 2026, and expects to break even on this capex within three years.
- ▪Alibaba's capital expenditure rose 75% to 67.68 billion yuan in the April-June 2026 quarter, driven by increased CPU chip procurement and rising semiconductor prices.
- ▪Alibaba reported a 75% fall in quarterly net profit for the April-June 2026 quarter due to heavily increased capital expenditure on artificial intelligence infrastructure.
Cloud revenue growth
- ▪Alibaba's AI cloud and compute services revenue rose 45% to 48.44 billion yuan in the June 2026 quarter, supported by its AI model-as-a-service business.
- ▪Alibaba's AI model-as-a-service business has surpassed 16 billion yuan in annual recurring revenue as of August 2026.
Proprietary chip deployment
- ▪Alibaba is deploying advanced chips produced by its in-house T-head unit at scale on supernodes to train and run inference on AI models.
- ▪Alibaba CEO Eddie Wu stated that deploying proprietary T-head chips in data centers to replace commercially procured chips will substantially increase gross margins and profitability.
AI model competition
- ▪Alibaba is a major investor in Chinese frontier AI startup Moonshot and supplies the startup with cloud computing infrastructure.
- ▪Alibaba is investing in frontier AI models to reach artificial general intelligence, despite acknowledging that current monetization of these models remains inadequate.
Enterprise market pivot
- ▪Alibaba split its AI businesses from its cloud computing arm and tasked CEO Eddie Wu with leading the Alibaba Token Hub group.
- ▪Chinese tech firms are pivoting toward offering better agentic and coding capabilities to capture more of China's domestic enterprise market.
Telecom token-based services
- ▪China Telecom recorded a 95% surge in intelligent computing revenue during the first half of 2026, driving its intelligent business revenue to 31.1 billion yuan.
- ▪China Telecom upgraded its Xingchen TokenHub platform, which hosts 142 large language models and more than 420 industry-specific AI applications.
- ▪China Unicom posted 41.9 billion yuan in computing-power revenue in the first half of 2026, representing a 13% increase across data centers, leased compute, software, and cloud AI.
- ▪China Unicom launched a token supermarket as part of an end-to-end ecosystem, connecting its UniAI platform to over 200 large language models.
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