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<Research>M Stanley: Massive LLM Price Cuts in CN Increase AI Application; Cloud Biz Rev. of BIDU/ BABA/ TENCENT Can Benefit
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Morgan Stanley released a report, highlighting that large language model (LLM) price reductions in China have led to an increase in AI applications and provided more AI use cases. The broker expected that the cloud revenues of BIDU-SW (09888.HK), BABA-SW (09988.HK), and TENCENT (00700.HK) could benefit, but smaller startups may be affected. According to the report, Alibaba Cloud announced on 21 May that 9 of the commercial and open-source LLMs from the Tongyi Qianwen series would have their prices reduced, with the main model (benchmarked to OpenAI's GPT-4) having its price axed by 97%. A few hours later, Baidu AI Cloud followed suit, announcing that 2 of its main models, Ernie Speed and Ernie Lite, would become free to use. The following day, Tencent Cloud also announced that it would lower the price of its LLMs, with Hunyuan Lite becoming free of charge immediately. According to the broker, BABA management attributed the price reduction to the scale benefit and technology advantages of Alibaba Cloud. Driven by rapidly growing demand for AI, BABA's AI-related cloud revenue achieved triple-digit growth in the most recent quarter. Morgan Stanley now expected BABA's cloud revenue growth to re-accelerate to double-digits in the 2FH25, driven by the recovery of the public cloud business and increased contributions from AI. In terms of profitability, the broker expected EBITA margins to remain in high single digits in FY25, compared to 5.6% in 4FQ24. AAStocks Financial News |
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