Alibaba Group Holding Limited (BABA) is turning heads with an AI strategy that's less about proprietary walls and more about open doors. The approach seems to be working.

The Chinese tech giant announced Tuesday that "a defining feature" of its 2025 AI approach is "its commitment to openness." The logic? Open-source software lets developers and companies build faster and cheaper, which creates a bigger ecosystem that ultimately benefits Alibaba's cloud business.

Qwen Becomes the World's Most Downloaded Open-Source AI

The timing of that statement wasn't accidental. On Monday, Alibaba's U.S.-listed shares jumped after its Qwen model family crossed 700 million downloads on Hugging Face, making Qwen the most widely adopted open-source AI system in the world, according to SCMP.

That milestone comes with some serious external validation. A Stanford report noted that Chinese open-source models have either caught up with or moved ahead of their U.S. counterparts in both capability and adoption. Meanwhile, Nvidia Corp. (NVDA) used Alibaba's technology as the foundation for its own Cosmos-Reason1-7B model, which was post-trained on Qwen2.5-VL-7B-Instruct.

Even Meta Platforms Inc. (META) has adopted Alibaba's open-source Qwen models as part of rebuilding its AI infrastructure. When Meta starts using your stuff, you're probably doing something right.

Cloud Spending Surge Drives Stock Rally

Alibaba (BABA) stock climbed about 14% over the past week after the company sharply boosted its capital expenditure budget for Alibaba Cloud, according to Futunn. Analysts believe the increased investment could drive profitability resilience well beyond current forecasts.

The recent rally adds to an impressive longer-term run. Alibaba shares have surged roughly 104% over the past 12 months, powered by growing investor confidence in the company's AI initiatives and a more favorable regulatory climate in China.

Back home, Alibaba created the Qwen Consumer Business Group to consolidate its chatbot, AI assistants, cloud tools, and AI hardware under one unified platform.

Wall Street Analysts See Sustained Cloud Growth

Charlene Liu, HSBC's Asia-Pacific head of internet and gaming research, said in a Friday research note that Alibaba's cloud business is well-positioned to maintain revenue growth as long as demand tied to artificial intelligence stays strong.

Here's where the monetization strategy gets interesting. Alibaba Group chairman Joe Tsai laid out the company's thinking at a November event in Hong Kong, making clear that the group doesn't generate revenue directly from AI models themselves.

"We run a cloud computing business," Tsai explained. "When you run models, you need to have cloud infrastructure... If people are running AI and they happen to want to use Alibaba Cloud, we have a whole suite of products from storage to data management to security to networking to containers."

In other words, give away the AI models, make money on the infrastructure needed to run them. It's a play that requires scale and patience, but with 700 million downloads and a 104% stock gain over the past year, investors seem willing to wait.

BABA Price Action: Alibaba shares were up 3.64% at $173.09 during premarket trading on Wednesday, according to market data.