Alibaba says AI spending for e-commerce Taobao Tmall is breaking even

SHANGHAI — Chinese tech giant Alibaba is already recouping its investment on artificial intelligence in the company’s e-commerce business, vice president Kaifu Zhang told reporters on Thursday.

The Chinese tech giant has bet big that AI will generate returns despite market concerns that companies are spending too much on the technology with little to show for it. Alibaba last month announced it will increase its spending on AI and cloud infrastructure, after pledging in February it would spend 380 billion yuan ($53 billion) over the next three years on the tech.

Zhang oversees e-commerce AI applications at Alibaba. Earlier in the day, he shared how the company has rolled out a range of AI tools, from making search results more personalized to improving the accuracy of virtual clothing try-ons.

The presentation comes a day after Alibaba began presales for Singles Day, China’s biggest shopping event of the year that’s akin to Black Friday.

Zhang said preliminary testing has shown consistent results from AI, including a 12% increase in returns on advertising spend.

“It’s very rare to see double-digit changes” in such tests, he said in Mandarin, translated by CNBC. Zhang predicted that thanks to AI integration, there would be a “very significant” positive impact on Alibaba’s gross merchandise volume during this year’s Singles Day shopping period, which centers on Nov. 11.

Alibaba’s China e-commerce unit remains the tech giant’s largest source of revenue, with growth of 10% year-on-year in the quarter ended June 30 to the equivalent of $19.53 billion.

Despite lackluster Chinese consumer spending in the last few years, during the Singles Day period last year, research firm Syntun estimated 20.1% year-on-year growth in sales to 1.11 trillion yuan for Alibaba’s Tmall, JD.com and PDD.

The company on a late August earnings call cast AI and consumption as “two major historic opportunities” that require Alibaba to make investments of “historic scale.”

“Our first priority at this point is making these investments,” CFO Toby Xu said at the time. “So for now, we may place relatively less emphasis on profit margins. But that does not mean that we don’t care about margins.”