Alibaba, China’s largest cloud service provider, has revealed that it is struggling to keep up with the growing demand for AI and expects the current cycle to continue for another three years.

Alibaba CEO Eddie Wu stated during the earnings call, “We do see that customer demand for AI remains very strong.” He stated that the company is unable to “keep up” with customer demand and predicts that this growth momentum will continue for “two to three years”.

His remarks highlight the vastly different development trajectory of China’s AI industry compared to the United States. Although a large number of American analysts believe that the industry has sunk into a foam, China still seems to be in a comfort zone.

This is partly due to a broader economic background – in the past five years, China has been hovering on the brink of deflation due to the collapse of the real estate market.

But the biggest factor is that Chinese cloud service providers and telecom operators have built much less infrastructure. Alibaba stated that it has invested 120 billion yuan (16.9 billion US dollars) in AI and cloud capital expenditures over the past 12 months.

Although Eddie Wu stated that the current three-year investment plan of 380 billion yuan (54 billion US dollars) is “too small in scale”, it still seems insignificant compared to the funding flood of AI companies such as Google (91 billion US dollars), Microsoft (65 billion US dollars), Meta (70 billion US dollars), which have invested in AI in just one year this year. These US mega corporations have all stated that they will increase their investments more aggressively next year.

For Alibaba, the third largest company in China by market value, the cloud business was its biggest growth engine during the difficult third quarter. Due to the adjustment of core e-commerce and logistics businesses, its profit report fell 53% to 20.6 billion yuan (2.9 billion US dollars).

But cloud revenue surged 34% to 39.8 billion yuan (5.6 billion US dollars), and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) surged 35%. The company stated that this is mainly due to the growth of public cloud, including the increase in sales of AI related products. In fact, the proportion of AI related revenue to external demand has exceeded 20%.

Alibaba stated in a document: “We are seeing a wider range of enterprise customers accelerating the adoption of our AI products and increasingly focusing on value-added applications.”

CFO Toby Xu stated that enterprise customers are increasingly inclined to choose suppliers with a full stack AI product portfolio. They are using AI more intensively, which means a significant increase in demand for computing, storage, and other cloud services.

Alibaba’s Hong Kong stock closed down 1.9% on Wednesday.