Will Cloud Computing Be The Next Big Growth Driver For Alibaba?

  • Alibaba and Nvidia will collaborate in developing the first GPU-based, high-performance cloud computing platform in China.
  • Cloud computing services could account for more than $1 billion of Alibaba’s revenue by 2018.
  • Alibaba is also investing in futuristic technologies, such as quantum computing, which could dominate computing in the next decade.

Alibaba (NYSE:BABA) will work with NVIDIA (NASDAQ:NVDA) on cloud computing and Artificial Intelligence (AI), Bloomberg Business reports.

Alibaba Cloud Computing (AliCloud), a subsidiary of Alibaba that was formerly known as Aliyun, will invest $1 billion on Big Data cloud technologies for businesses. Big Data refers to extremely large or complex sets of information that can be analysed with high-performance computers to spot patterns, trend and associations.

“The Big Data Platform fulfils our vision of sharing our vast data troves that will create immense value to our users,” AliCloud president Simon Hu said at the launch in Shanghai. “What we want to do at Alibaba is turn the data-processing capacity and data-security capabilities that we’ve accumulated over the last decade into a product, so that data becomes a resource and a service that we can provide our clients."

Hu added that, apart from being fast-expanding in Asia, Alicloud will also maintain its growth in Europe and the Middle East. According to Bloomberg Business, cloud computing services currently account for only 3.1% of Alibaba's sales, but could account for more than $1 billion of Alibaba’s revenue by 2018.

In October, Alibaba announced that it would open its second Silicon Valley data center to meet rising cloud demand. The public cloud presents a $120 billion global market opportunity, and Alibaba is gearing up to compete with Amazon (NASDAQ:AMZN), whose web services revenue rose to $2.1 billion in the third quarter of 2015. According to Bloomberg Business, AliCloud hopes demand for processing and storage from governments and businesses can propel growth during the next decade, thereby increasing its competitiveness against Amazon.

At the same event, Alibaba announced a strategic partnership with Nvidia. AliCloud and Nvidia will collaborate in developing the first GPU-based, high-performance computing cloud platform in China.

Nvidia leads the Graphical Processing Units (GPU) sector and offers specialized platforms for gaming, automotive, data center, and professional visualization markets. The company's products, services and software power applications in virtual reality, artificial intelligence, and autonomous cars.

In November 2015, Nvidia unveiled a credit-card sized module that harnesses the power of machine learning to enable a new generation of smart, autonomous machines that can learn. At the recent Consumer Electronics Show (CES) 2016 in Las Vegas, Nvidia launched Nvidia DRIVE PX 2, the world’s most powerful engine for in-vehicle Artificial Intelligence (AI) for autonomous cars. It seems likely that Nvidia's embedded AI processors could significantly boost the performance of AliCloud Big Data analysis modules.

"We will provide our clients, especially emerging start-up companies, with GPU-accelerated computing services on AliCloud, the leader in cloud computing services in China," said Shanker Trivedi, Nvidia’s vice-president of worldwide sales.

Alibaba is also investing in futuristic technologies, such as quantum computing, which could dominate computing in the next decade. Alicloud co-founded a quantum computing laboratory with the Chinese Academy of Sciences (CAS).

"The CAS - Alibaba Quantum Computing Laboratory will undertake frontier research on systems that appear the most promising in realizing the practical applications of quantum computing," said Jianwei Pan, Professor and Executive Vice President of University of Science and Technology of China. "The laboratory will combine the technical advantages of Aliyun in classical calculation algorithms, structures and cloud computing with those of CAS in quantum computing, quantum analog computing and quantum artificial intelligence, so as to break the bottlenecks of Moore’s Law and classical computing."

Unlike regular processors, which store information in binary bits (zero or one), quantum processors use quantum bits, which can hold values of zero and one at the same time. This quantum superposition can allow many more calculations to be performed simultaneously. The new quantum computing laboratory is expected to produce a general-purpose quantum computer prototype by 2030, and develop quantum computers that can process data billions of times faster than current digital computers.

"This investment in the development and application of quantum computing reflects the scale and clarity of our long-term vision to collaborate with partners in an ecosystem model towards the sustained development of the economy and society," said Alibaba Group Chief Technology Officer Jian Wang. "New discoveries in information security and computing capacity based on quantum computing could be as significant in the future as big data technologies are today."

Bullish tech investors convinced that futuristic computer technologies such as embedded AI and quantum computing will power the economy of the next decade, and that Chinese tech stocks will do well in the long term despite current uncertainties, should consider Alibaba stock. In fact, the Chinese giant is betting on the same advanced "moonshot" technologies that Alphabet Inc-A (NASDAQ:GOOGL) is betting on.

But the impact of the partnership on Nvidia, a smaller company with a narrower focus, is likely to be evident sooner. The company has identified a very promising tech sector as a strategic focus, and Nvidia stock is likely to rise in the mid term.

Giulio Prisco Giulio Prisco   on Amigobulls :
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