Alibaba’s AI Ambitions Fuel a Remarkable Stock Resurgence

Once viewed primarily as an e-commerce titan, Alibaba has undergone a significant transformation, emerging in 2025 as a dominant force in the global artificial intelligence arena. This strategic pivot is reflected in its equity performance, with shares surging more than 70% year-to-date. The explosive growth is attributed to a booming cloud computing division and a proprietary AI model that is outperforming established Western competitors.

The cornerstone of Alibaba's AI success is its Qwen model, which has achieved staggering global adoption. With over 600 million downloads to its name, the model accounts for more than half of all AI model downloads worldwide. Its technical excellence was formally recognized when the Qwen research team received the Best Paper Award at the NeurIPS 2025 conference.

Notably, Qwen's appeal extends far beyond China, with major international corporations integrating the technology:
* Airbnb adopted Qwen for its superior processing speed and cost efficiency.
* Nvidia has incorporated the model into a range of its applications.
* Electric vehicle maker BYD uses Qwen to power in-dashboard AI interactions for drivers.
* Meta is reportedly utilizing the model for its internal training systems.

Cloud Division Powers Ahead with Double-Digit Growth

Alibaba's cloud business is a primary growth engine, reporting a 34% year-over-year revenue increase for the September 2025 quarter. Products related to artificial intelligence have now seen triple-digit growth rates for nine consecutive quarters. CEO Eddie Wu noted that "robust AI demand" is currently outstripping the company's available capacity.

Should investors sell immediately? Or is it worth buying Alibaba?

The cloud unit's operating profit (EBITA) jumped 35% to 3.6 billion yuan. Commanding a 35.8% share of China's AI cloud market, Alibaba maintains a firm leadership position in this critical sector.

Heavy Investment and Strategic Challenges

To support this expansion, Alibaba has committed approximately 120 billion yuan over the past four quarters to AI and cloud infrastructure. Management has indicated that this aggressive investment pace could even accelerate. In September, the company further bolstered its war chest by issuing $3.2 billion in convertible bonds to fund additional investments.

This spending comes at a cost. The company's adjusted total EBITA plummeted 78% to 9.1 billion yuan. The decline is largely due to substantial investments in competitive segments like quick commerce, where Alibaba battles rivals such as PDD Holdings, JD.com, and ByteDance. An additional challenge is the company's inability to purchase Nvidia's most advanced GPUs due to export restrictions, forcing greater investment into its own chip development.

Analysts Point to Continued Upside Potential

Despite the significant rally, Wall Street analysts maintain a bullish stance, consistently rating Alibaba as a "Strong Buy." The average price target stands at $205 per American Depositary Share (ADS), implying a potential upside of roughly 35%. Morningstar analysts estimate a fair value of $179 per ADS. Even after its impressive gains, the stock remains 52% below its all-time high, suggesting the persistent "China-tech discount" continues to weigh on its valuation.