Alibaba Fuels AI Price War With Video Model Under 1 Yuan

Alibaba Group Holding Ltd. entered the generative video market with a new model priced aggressively against competitors, signaling a new front in China’s artificial intelligence price war. The company on April 27 began testing HappyHorse 1.0, a video generation model with a public price of 0.9 yuan ($0.12) per second for 720P resolution, according to its website.

The move reflects a market that has rapidly grown accustomed to low-cost, highly efficient models. “The expectation that new players will emerge is now baked into valuations,” said Lian Jye Su, chief analyst at Omdia, noting that markets have become more realistic about both the capabilities and limits of AI after a year of intense competition.

The grayscale test for HappyHorse 1.0 is accessible to professional creators and enterprise clients through its official website and Alibaba’s cloud platform, while the general public can access it via the Qianwen App. For large-volume customers, the price can drop to as low as 0.44 yuan per second, a move aimed directly at capturing market share from domestic rivals like Baidu Inc., Tencent Holdings Ltd., and startups such as DeepSeek.

This launch could bolster Alibaba's competitive stance in the fast-growing AI generation market, potentially driving growth for its cloud division, a key business segment. However, it also intensifies pressure on profitability across the sector as companies sacrifice margins for user adoption in a race for scale.

A Market Accustomed to Disruption

The muted reaction to recent AI launches, such as DeepSeek-V4, highlights a major shift in market dynamics. Last year, DeepSeek’s initial low-cost models triggered a global tech share selloff, viewed by analysts as a "black swan" event that forced a repricing of assumptions about AI infrastructure spending. In contrast, Alibaba's announcement is seen as another logical step in a brutally competitive landscape. Competitors like Kimi and Qwen have already narrowed the performance gap, making it harder for any single model to shock the market.

The focus has shifted from surprise to strategic necessity. The AI price war in China means companies are forced to offer increasingly powerful models at lower costs to stay relevant. This trend is not just about competition between model developers; it's fundamentally altering the economics of creative industries. For example, AI platforms are now replacing traditional fashion photoshoots, which can cost upwards of €5,000, with AI-generated images costing as little as $0.50 each. “What used to require a €5,000 photoshoot, complex logistics, and weeks of coordination can now be executed on demand,” said Alexandre Fauvet, CEO of Le Coq Sportif, an early adopter of such technology.

The Geopolitical Dimension

Underpinning the domestic price war is the broader U.S.-China tech rivalry. With Washington tightening export controls on advanced semiconductors, Chinese firms are under immense pressure to develop a self-reliant AI ecosystem. The ability to run powerful models on homegrown hardware is becoming a critical long-term advantage. DeepSeek recently adapted its V4 model to run efficiently on Huawei Technologies Co. chips, a significant step in decoupling from U.S. technology.

“What matters now is whether China can continue advancing on AI development, and potentially do so with its own chips - the geopolitical implications would be significant,” said Alfredo Montufar-Helu, managing director at Ankura China Advisors. Alibaba’s push with HappyHorse, while currently running on existing infrastructure, is part of this larger national effort to secure technological sovereignty and compete on a global scale, independent of potential supply chain disruptions.

For investors, Alibaba's strategy presents both opportunity and risk. While capturing market share in the AI space could re-energize its cloud business, the race-to-the-bottom on pricing threatens to erode profit margins for all participants. The launch of HappyHorse at less than 1 yuan per second is a clear statement of intent, but the ultimate winner will be the one who can sustain innovation while navigating the economic realities of a commoditizing market.

This article is for informational purposes only and does not constitute investment advice.