- China has launched an antitrust investigation into the Chinese e-commerce giant Alibaba, which is also currently the third biggest cloud provider in the world, by market share.
- This probe could open up opportunities for Amazon Web Services, Microsoft, and Google in Europe, South America, and Asia, according to one analyst, while smaller Chinese cloud players like Tencent and JD.com may also have a better chance to compete
- Amazon and Google are also currently facing antitrust scrutiny in the US.
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A recent antitrust investigation into Chinese e-commerce giant Alibaba could open up opportunities for cloud rivals, including Amazon, Microsoft, and Google, analysts say.
On December 24, China announced an antitrust probe into Alibaba over suspected monopolistic practices like requiring merchants to sell their products through Alibaba alone, causing the tech giant’s stock price to plummet.
While Alibaba has become a stalwart in e-commerce — it posted a record-breaking $74 billion in “Singles Day” sales this year — it’s also a major cloud player.
With news of Alibaba’s antitrust investigation, Wedbush Securities’ Daniel Ives is bullish on the prospects for American tech stocks in general, as well as the cloud players.
Alibaba is the third biggest cloud in the world with 9.1% of the global market share in 2019, according to Gartner, trailing only behind Amazon Web Services (45% market share) and Microsoft (17.9% market share), and ahead of Google Cloud (5.3% market share).
“You could see a lot more pieces of the pie in terms of market share,” Ives told Business Insider.
Cloud vendors like AWS, Microsoft, and Google Cloud may be able to seize market share in Europe, South America, and Asia which may have otherwise gone to Alibaba, said Ives, as the investigation hinders Alibaba’s execution.
Within China’s tech market, there could be “substantial impact” from this investigation, Forrester analyst Charlie Dai said, as it will allow smaller companies the opportunity for more sustainable development and collaborative business opportunities with other Chinese tech giants in the long term.
“The antitrust probe in China aims to provide a more balanced business environment to sustain market vitality and facilitate innovation,” Dai told Business Insider.
The antitrust probe on Alibaba could be an opportunity for smaller Chinese cloud players like JD.com and Tencent
While China has long been lenient with tech companies, in the last couple of months, the government has been coming down on them with an “iron fist,” Ives says. In addition to the latest antitrust investigation into Alibaba, China recently ordered fintech giant Ant Group, an affiliate of Alibaba, to scale back to its origins as a payment service, with officials saying that Ant “defied” regulations and engaged in anticompetitive business practices, according to a CNN report.
“It’s still nascent in terms of the buildout, but it’s caught the Chinese regulators by surprise just how accelerated [the tech] market’s gotten, and it’s really become more of an oligopoly,” Ives said. “Alibaba — just given their position in China on the e-commerce side and other tentacles of consumer and enterprise — they were on the path to be the Amazon-like player in cloud in China.”
The last few months for Alibaba has been “one disaster after another,” and this probe will constrict Alibaba in its growth and product strategy, Ives says. What’s more, Alibaba likely won’t be the last tech giant that China cracks down on.
“The regulatory situation in China, it’s starting to mirror the US where Beijing is cracking down on Alibaba and other stalwarts,” Ives said, in a nod to the recent regulatory scrutiny that American firms like Amazon, Apple, Google, and Facebook have faced this year. “If you look at the latest shot across the bow, it’s going to have a significant impact on the cloud shift in China.”
Alibaba being “caught in the crosshairs” could be an opportunity for smaller Chinese cloud players like WeChat-owner Tencent, which only has 2.8% of the global cloud market share, and the e-commerce company JD.com, which also has a cloud business, to gain market share in China, Ives says.
Because one thing’s for sure: The opportunity of the cloud will continue to grow.
“Cloud business is the technology foundation for other business operations,” said Dia, “Therefore there will be limited collateral damage in the short term but better growth opportunities in the long run.”
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