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Why Alibaba Is Becoming China's AI Heavyweight

MarketDash Editorial Team
9 hours ago
Alibaba is positioning itself as a dominant player in China's AI race, with its Qwen models gaining traction domestically and internationally. The stock has surged 77% this year as the company scales its AI strategy across cloud, consumer apps, and hardware.

Alibaba Group Holding Limited (BABA) isn't just sitting around watching the AI revolution happen. The Chinese tech giant is building out an artificial intelligence strategy that's starting to turn heads both at home and abroad, with the stock up more than 77% year-to-date to show for it.

The company is methodically scaling its Qwen AI models across consumer apps, cloud services, and hardware, effectively creating an ecosystem where AI isn't just a feature but the foundation. And here's the interesting part: global tech players are taking notice.

Getting Validation From Unexpected Places

Meta Platforms Inc. (META) recently adopted Alibaba's open-source Qwen models as part of its effort to rebuild its AI infrastructure. That's not just a minor technical footnote—it's a signal that Qwen has genuine international relevance. When one of Silicon Valley's biggest companies turns to a Chinese AI model, it tells you something about the quality of what Alibaba has built.

Back in China, Alibaba created the Qwen Consumer Business Group to unify its chatbot, assistants, cloud tools, and AI hardware into a single platform. The goal? Turn Qwen into a cross-device "super app" that follows users wherever they go. By keeping Qwen open source while expanding real-world applications, Alibaba is simultaneously boosting adoption, strengthening its cloud business, and positioning AI as a core long-term growth driver.

What The Smart Money Is Saying

Nomura remains bullish on Alibaba's AI trajectory, pointing to accelerating innovation across China's entire tech sector. Shi Jialong, Nomura's head of China internet and media industry research, said Alibaba is well positioned to benefit from rising AI adoption and expanding use cases, according to reports.

Nomura's China technology analyst Duan Bing added that Chinese companies are rapidly advancing AI technologies, with application software attracting more users and helping firms scale their businesses. He noted that Beijing is pushing hard to build a self-sufficient domestic AI supply chain, though advanced AI chips remain a constraint. Still, Duan expects continued policy support to help local chipmakers and AI companies close the gap with Western competitors.

The Numbers Behind The Strategy

In late November, Alibaba reported fiscal second-quarter results that beat expectations across the board. The company posted revenue of $34.81 billion, up 5% year over year and above the $34.43 billion consensus. Strip out divested businesses, and revenue would have grown 15% on a like-for-like basis.

Alibaba delivered adjusted earnings of 61 cents per ADS, handily beating the 49-cent estimate. But here's where things get interesting—and where the investment strategy becomes clear. Adjusted net income fell 72% to $1.45 billion, while adjusted EBITA dropped 78% to $1.27 billion. Why? Because Alibaba is spending aggressively on quick commerce, user experience upgrades, acquisitions, and technology.

The bright spots tell the story of where the company is headed. China e-commerce revenue climbed 16% to $18.62 billion, driven by faster onboarding of Tmall brands and rising quick-commerce demand. International commerce revenue rose 10% to $4.89 billion as AliExpress expanded local inventory.

But the real star? The Cloud Intelligence Group grew revenue 34% to $5.59 billion, fueled by strong public cloud demand and accelerating AI adoption. That's the kind of growth rate that justifies the investment phase Alibaba is clearly in.

Playing The Long Game

Alibaba is prioritizing AI, cloud infrastructure, and a unified consumption platform over near-term profitability. That's a bet that the AI opportunity in China is massive enough to justify short-term margin pressure. Given the 77% stock price surge this year, investors seem to be buying that argument.

The company is essentially building the connective tissue between its e-commerce dominance and its cloud infrastructure, with AI as the glue holding it all together. Whether that vision fully materializes remains to be seen, but the early validation from companies like Meta suggests Alibaba has built something genuinely competitive on the global stage.

BABA Price Action: Alibaba shares were down 1.43% at $147.94 during premarket trading on Tuesday.

Back to News

Why Alibaba Is Becoming China's AI Heavyweight

MarketDash Editorial Team
9 hours ago
Alibaba is positioning itself as a dominant player in China's AI race, with its Qwen models gaining traction domestically and internationally. The stock has surged 77% this year as the company scales its AI strategy across cloud, consumer apps, and hardware.

Alibaba Group Holding Limited (BABA) isn't just sitting around watching the AI revolution happen. The Chinese tech giant is building out an artificial intelligence strategy that's starting to turn heads both at home and abroad, with the stock up more than 77% year-to-date to show for it.

The company is methodically scaling its Qwen AI models across consumer apps, cloud services, and hardware, effectively creating an ecosystem where AI isn't just a feature but the foundation. And here's the interesting part: global tech players are taking notice.

Getting Validation From Unexpected Places

Meta Platforms Inc. (META) recently adopted Alibaba's open-source Qwen models as part of its effort to rebuild its AI infrastructure. That's not just a minor technical footnote—it's a signal that Qwen has genuine international relevance. When one of Silicon Valley's biggest companies turns to a Chinese AI model, it tells you something about the quality of what Alibaba has built.

Back in China, Alibaba created the Qwen Consumer Business Group to unify its chatbot, assistants, cloud tools, and AI hardware into a single platform. The goal? Turn Qwen into a cross-device "super app" that follows users wherever they go. By keeping Qwen open source while expanding real-world applications, Alibaba is simultaneously boosting adoption, strengthening its cloud business, and positioning AI as a core long-term growth driver.

What The Smart Money Is Saying

Nomura remains bullish on Alibaba's AI trajectory, pointing to accelerating innovation across China's entire tech sector. Shi Jialong, Nomura's head of China internet and media industry research, said Alibaba is well positioned to benefit from rising AI adoption and expanding use cases, according to reports.

Nomura's China technology analyst Duan Bing added that Chinese companies are rapidly advancing AI technologies, with application software attracting more users and helping firms scale their businesses. He noted that Beijing is pushing hard to build a self-sufficient domestic AI supply chain, though advanced AI chips remain a constraint. Still, Duan expects continued policy support to help local chipmakers and AI companies close the gap with Western competitors.

The Numbers Behind The Strategy

In late November, Alibaba reported fiscal second-quarter results that beat expectations across the board. The company posted revenue of $34.81 billion, up 5% year over year and above the $34.43 billion consensus. Strip out divested businesses, and revenue would have grown 15% on a like-for-like basis.

Alibaba delivered adjusted earnings of 61 cents per ADS, handily beating the 49-cent estimate. But here's where things get interesting—and where the investment strategy becomes clear. Adjusted net income fell 72% to $1.45 billion, while adjusted EBITA dropped 78% to $1.27 billion. Why? Because Alibaba is spending aggressively on quick commerce, user experience upgrades, acquisitions, and technology.

The bright spots tell the story of where the company is headed. China e-commerce revenue climbed 16% to $18.62 billion, driven by faster onboarding of Tmall brands and rising quick-commerce demand. International commerce revenue rose 10% to $4.89 billion as AliExpress expanded local inventory.

But the real star? The Cloud Intelligence Group grew revenue 34% to $5.59 billion, fueled by strong public cloud demand and accelerating AI adoption. That's the kind of growth rate that justifies the investment phase Alibaba is clearly in.

Playing The Long Game

Alibaba is prioritizing AI, cloud infrastructure, and a unified consumption platform over near-term profitability. That's a bet that the AI opportunity in China is massive enough to justify short-term margin pressure. Given the 77% stock price surge this year, investors seem to be buying that argument.

The company is essentially building the connective tissue between its e-commerce dominance and its cloud infrastructure, with AI as the glue holding it all together. Whether that vision fully materializes remains to be seen, but the early validation from companies like Meta suggests Alibaba has built something genuinely competitive on the global stage.

BABA Price Action: Alibaba shares were down 1.43% at $147.94 during premarket trading on Tuesday.