BEIJING (Reuters) - Chinese tech giants Alibaba and Baidu slashed prices on Tuesday of large-language models (LLMs) used to power generative artificial intelligence products, as a price war in the cloud computing sector heats up in China.

Alibaba's cloud unit announced price cuts of up to 97% on a range of its Tongyi Qwen LLMs. Its Qwen-Long model, for instance, will cost only 0.0005 yuan per 1,000 tokens - or units of data processed by the LLM - after the price cut, down from 0.02 yuan per 1,000 tokens.

It was quickly followed by Baidu, which hours later announced that its Ernie Speed and Ernie Lite models would be free for all business users.

A price war in China's cloud computing space has been ongoing for the past few months, with Alibaba and Tencent recently lowering prices of their cloud computing services.

Many Chinese cloud vendors have relied on AI chatbot services to boost sales, after China saw a wave of investment in large language models in response to the hit debut of U.S.-based OpenAI's ChatGPT in late 2022.

The price war in China's cloud computing space has now hit the large-language models that power these chatbots, threatening to lower companies' profit margins.

Baidu's Ernie Lite and Ernie Speed were released in March and until Tuesday corporate customers paid to use them.

Bytedance announced last week that the main model of its Doubao LLMs would be priced 99.3% lower than the industry average for business users.

Chinese LLM developers have focused on charging businesses as a way to monetize their investments in LLMs.

Some have also begun targeting individual users. Chinese startup Moonshot recently launched a tipping feature, where business and individual users can pay to prioritize their use of its chatbot services.

Baidu was the first company in China to offer its LLM products to paying consumers, charging 59 yuan per month for those looking to use its most advanced Ernie 4 model.

(Reporting by Liam Mo and Eduardo Baptista; Editing by Susan Fenton)

By Liam Mo and Eduardo Baptista