Alibaba Group (BABA) Surges 12.90% on AI-Driven Cloud Momentum

Alibaba Group (BABA) surged 12.90% on Thursday, marking its highest level since August 2025, with the stock hitting an intraday gain of 14.28%. The rally reflects renewed investor confidence in the company’s strategic focus on artificial intelligence (AI) and cloud computing, which have driven recent momentum in its stock price.

At the core of Alibaba’s resurgence is its aggressive investment in AI infrastructure, including the development of a proprietary advanced AI chip. The chip, designed to optimize AI workloads, underscores the company’s push to reduce reliance on foreign semiconductor suppliers and enhance its competitive edge in the global AI race. This move aligns with broader Chinese efforts to localize critical technologies amid U.S. export restrictions, positioning Alibaba as a key player in reshaping the AI landscape. CEO Eddie Wu has emphasized the importance of AI-driven cloud services as a long-term monetization strategy, with the cloud division reporting triple-digit year-over-year growth in AI-related revenue for eight consecutive quarters.

Alibaba Cloud, the company’s most profitable division, has emerged as a growth engine, posting a 26% year-over-year revenue increase in the June-ended quarter. The division’s profitability has improved despite significant capital expenditures, with adjusted EBITA rising 26% YoY. The development of the new AI chip has further bolstered investor sentiment, as it is expected to lower costs for cloud customers and reduce dependency on international suppliers. These advancements have positioned Alibaba Cloud as a critical battleground in the global AI race, competing with U.S. tech giants like Microsoft and Google.

While the cloud division has driven much of the recent optimism, Alibaba’s broader financial performance has shown mixed results. Total revenue in the June quarter rose 2% YoY to 247.65 billion yuan, falling short of analyst expectations. However, net income surged 78% YoY to 43.11 billion yuan, fueled by gains from equity investments and the disposal of its Turkish e-commerce unit. The company’s core e-commerce business, which accounts for over half of its revenue, faces margin pressures due to investments in emerging segments like instant commerce, including Taobao’s one-hour delivery service. These strategic trade-offs highlight Alibaba’s long-term vision to dominate high-growth markets, even at the expense of near-term profitability.

Investor enthusiasm for Alibaba’s stock has been further amplified by its positioning in the U.S.-China AI rivalry. The company’s AI initiatives, including open-source models and advanced hardware development, align with China’s broader strategy to reduce reliance on foreign technology. This geopolitical context has elevated Alibaba’s significance beyond its domestic market, as it competes with global tech leaders to shape the future of AI. The stock’s 40% surge in U.S. markets this year reflects a market belief in Alibaba’s ability to balance high-cost investments with sustainable growth, despite uncertainties around regulatory scrutiny and shifting market dynamics.