Alibaba Group Holding (NYSE:BABA) is doubling its artificial intelligence (AI) investments to regain its mojo in Southeast Asia’s e-commerce space.

Over the past two years, the Chinese e-commerce juggernaut has invested about $2 billion in regional platform Lazada, a portion of which is going behind AI and logistics upgrades to fend off fierce competition in a region where profit margins are notoriously slim.

Shopee holds a dominant 45% market share in Southeast Asia, while TikTok Shop has rapidly captured 20% of the market since launching its e-commerce operations. Lazada, in contrast, held a 20% market share last year, the Wall Street Journal cites Bernstein Research.

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While Lazada appeals more to older shoppers, platforms like Shopee and TikTok Shop have gained popularity among younger, tech-savvy consumers who prefer livestreaming and social commerce.

AI-driven improvements, including personalized shopping recommendations and AI-based after-sales services, are in the works, the WSJ cites Lazada’s CEO, James Dong.

Dong emphasized that these innovations will help Lazada attract a broader user base and streamline logistics for sellers on the platform.

With AI tools embedded into Lazada’s platform, sellers can generate market-specific content, forecast demand more accurately, and improve logistical planning.

Recent reports indicated Lazada is courting European luxury brands to boost its moat.

Lazada targeted $100 billion in e-commerce volume by 2030. For the first time, Lazada became EBITDA positive in July 2024, backed by its artificial intelligence-enabled operations and improved online marketing.

Alibaba’s move signifies its efforts to boost growth via geographical expansion as China battles a weak economy further exacerbated by regulatory crackdowns and geopolitical tensions with the US.

Alibaba’s e-commerce business is already grappling with intense price rivalry with domestic rivals, and the US sanctions restrict its prospects of integrating AI technology from the likes of Nvidia Corp (NASDAQ:NVDA).

Alibaba stock gained 21% in the last 30 days as China slashed key rates, and reports indicated additional stimulus to boost growth.

Investors can gain exposure to Alibaba through Invesco Golden Dragon China ETF (NASDAQ:PGJ) and JPMorgan US Tech Leaders ETF (NASDAQ:JTEK).

Price Action: BABA stock is down by 0.82% at $101.34 premarket at the last check Thursday.

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