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Author: Anna Vodopyanova

After e-commerce and delivery, JD.com Inc. (Nasdaq: JD) is now looking to rival Alibaba Group (NYSE: BABA; HKEX: 9988) in cloud services.

China's major online retailer JD, which also operates JD Logistics and JD Digits, has started shifting its focus to technology this month through its subsidiary, JD Cloud & AI. Chairman of the company's tech committee, Bowen Zhou, discussed the move in a CNBC in a recent interview. He said the ultimate goal is to deliver cloud computing services to Fortune 500 companies, as well as U.S. and European tech firms looking to expand in China.

Thus,JD is entering the highly competitive market dominated by conglomerates Alibaba, Tencent Holdings (HKEX: 0700), and Baidu (Nasdaq: BIDU). Alibaba's cloud computing segment has been its fastest-growing. For the year-end trimester, the giant posted 62% year-over-year revenue growth, at $1.5 billion, in cloud, while its core commerce sector, excluding logistics and local commerce, grew 36%, according to its quarterly report posted in mid-February.

Baidu posted 35% y-o-y growth in "other revenues," which included cloud services, at $1.2 billion, for the same quarter. China's top search engine operator and the developer of the self-driving Apollo program, Baidu already has Tesla Inc. (Nasdaq: TSLA) on its side, providing map cloud services for the American automaker in China.

Tencent, operating in gaming, payments, and social networking, reported $2.4 billion in cloud revenue for the fourth quarter and reached 1 million in paying customers. The company said it especially increased market share in the internet services, municipal services, tourism, and industrial sectors.

All three have also been investing in blockchain and AI, as well as in chip development.

China's Growing Cloud

Canalys estimated in a March 2020 report that China's cloud market grew nearly 67% in the fourth quarter and took up 10.8% of the world total, making it the second-largest. Alibaba held 46.4% of the cloud computing spend, Tencent followed with 18%, and Baidu had 8.8% in China, according to the market analytics firm.

The coronavirus outbreak, which led to massive lockdowns of China's businesses nationwide in the first quarter, will undoubtedly accelerate digitization and cloud computing development.

In a corporate blog last week, JD said it is "now one of the highest investors in R&D among Chinese Internet companies." Starting with the story of how an IBM computer defeated Garry Kasparov in a 1997 chess tournament, describing Bowen Zhou's fascination with technology and AI, through his service at IBM Watson and now JD, the article arrived at JD's trusted (a key word for Chinese businesses) technology services with Zhou as its leader.

The blog cited Zhou as saying, "It is quite natural for JD to open its accumulated mature technology services to external partners, from e-commerce to logistics to finance, to enable partners down and up the supply chain to improve their own efficiency."

On Monday in New York, the stock in JD shifted 2% higher early, but slipped later in the day to $39.83 per American depositary share, 32 cents below Friday's close.

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JD to Snatch Share of China's Cloud Market Dominated by the Big Three - CapitalWatch