Canalys, a tech market analysis firm, stated in a report on Wednesday that the Chinese cloud services market continues to be cautious and is heavily reliant on the government and state-owned businesses to maintain progress. According to Canalys data, an increase of 45% in 2021 has been followed by a noticeable drop in the market's development over the last two years. Despite this, implementation of AI models on the cloud, due to a surge in the demand for services like ChatGPT, is anticipated to propel the industry forward.
Despite the excitement surrounding artificial intelligence, cloud services spending in mainland China is yet to experience a significant boom. According to a report from Canalys, the Chinese cloud services market remains cautious, relying heavily on government and state-owned enterprises to maintain growth. Although the surge of interest in the possibilities of ChatGPT-like services suggested that it would be a major driver of the industry's growth, this has not been the case. For instance, Alibaba's cloud business, which has a market share of 39%, reported just 2% revenue growth in the quarter ended September 30th. Huawei, the second largest cloud provider, and the publicly traded Tencent also did not specify their cloud revenue for the third quarter. The report from Canalys stated that the three largest cloud players held the same market share as they did in the prior quarter, while the entire segment's growth slowed to 10% in 2022 and is estimated to be at 12% in 2023 - significantly lower than the 45% rise in 2021.
Domestic expenditure on cloud services increased by 18% during the third quarter, bringing it to a total of $9.2 billion. Nevertheless, it experienced a considerable deceleration from 13% in the preceding three months to 5.7%, based on the CNBC analysis of Canalys data.
Canalys reported that Chinese mainland's share of the global cloud market came to 12% in the third quarter, and CNBC analysis revealed that third-quarter global cloud expenditure had increased by 1.5% from the previous quarter.
CNBC Pro has more information about China. JPMorgan has selected certain Chinese stocks to buy presently, but Alibaba is not one of them. A portfolio manager elaborated on why he has the maximum faith in one Chinese tech stock. An analyst from Morgan Stanley pointed out that the Chinese version of Spotify has not received adequate attention. Goldman Sachs has a strong liking for a sub-sector in China and they have mentioned three stocks to purchase.
JPMorgan's portfolio manager has issued a list of China stocks to purchase, which does not include Alibaba. The professional has articulated that he has the greatest confidence in a specific Chinese tech stock. Furthermore, Morgan Stanley has indicated that the Chinese analogue of Spotify is underrated. Additionally, Goldman Sachs is passionate about a sub-sector in China and has highlighted three stocks to buy.
The research firm noted that the industry has been devoting a substantial amount of resources to AI in an effort to generate profits from AI-based products through "partner ecosystems" encompassing developers, software providers, and experts, as indicated in the report. Although this has yet to lead to any major increases in the cloud sector, per Canalys, the complex nature of AI can be viewed as presenting hindrances to its adoption and deployment, simultaneously offering chances for an extended AI framework. This year, Alibaba, Huawei, Tencent, and Baidu, among other Chinese firms, have all presented AI models and offerings.
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