Alibaba Emerges as China's AI Powerhouse with $87 Billion Market Surge

Alibaba Group Holding Ltd. has staged a dramatic comeback in 2025, with its Hong Kong-listed shares surging 46% since January 13, adding nearly $87 billion to its market capitalization. This rally positions Alibaba as China’s leading Big Tech performer, outperforming rivals Tencent, Baidu, and JD.com, while reigniting investor confidence in its AI ambitions.

The resurgence stems from Alibaba’s aggressive pivot to artificial intelligence under CEO Eddie Wu and Chairman Joe Tsai, who refocused the company on core commerce and AI innovation. Key developments include:

•  Qwen 2.5 Max, Alibaba’s flagship AI model, outperforming Meta’s Llama and DeepSeek’s V3 in benchmark tests.
• Strategic investments in AI startups like Moonshot and Zhipu.
• A reported collaboration with Apple to integrate AI features into iPhones in China, boosting shares further.

Executives Wu and Tsai, part of Alibaba’s founding team, spearheaded a year-long turnaround after regulatory crackdowns and post-pandemic slumps eroded its cloud and consumer divisions. Their strategy included slashing cloud service prices to regain market share and prioritizing AI infrastructure.

Despite progress, hurdles remain:

• Slow adoption of paid AI services in China.
• Cloud revenue growth trailing U.S. giants like Microsoft (+31%) and Amazon (+19%), with Alibaba’s cloud segment rising just 9.7% year-over-year.
• Analysts caution that monetizing AI capabilities remains uncertain, though JPMorgan notes AI could drive revaluation.

Alibaba’s shares trade at 12.2x forward earnings, below its historical average, attracting value investors. Upcoming earnings reports will shed light on AI monetization and cloud growth.

“The emergence of DeepSeek sparked a new AI catalyst for Chinese tech stocks, and Alibaba has the most concrete growth prospects in this space.”
— Andy Wong, Investment Director at Solomons Group

Alibaba’s AI-driven rally underscores its transformation from an e-commerce titan to a central player in China’s tech future, though sustaining momentum hinges on overcoming adoption barriers and closing the cloud gap with Western rivals.