Alibaba's UAE AI Expansion Sparks U.S. Security Fears, Fuels 2025 Stock Surge

Alibaba Group Holding Limited (BABA) has seen its stock nearly double in 2025, driven by a strategic push into cloud computing and artificial intelligence (AI), highlighted by the opening of a second data centre in Dubai. The facility, part of a $53 billion three-year investment plan, underscores the company's ambition to dominate the Middle East's rapidly growing tech market. Revenue from Alibaba's cloud division jumped 26% year-over-year to 33.4 billion yuan ($4.7 billion) in the fiscal first quarter of 2026, with AI-related services maintaining triple-digit growth for eight consecutive quarters.

The Dubai expansion, nine years after the first facility, aligns with the UAE's broader efforts to position itself as a global AI hub. The country is building the largest AI campus outside the U.S., a project involving partnerships with Nvidia, OpenAI, and Microsoft. However, the deal remains mired in U.S. security concerns over potential Chinese access to advanced semiconductors, with sources indicating the agreement has yet to finalize.

Alibaba's cloud growth is bolstered by strategic partnerships, including Abu Dhabi-backed digital lender Wio Bank, and a $52.7 billion global infrastructure expansion plan. The company now operates 91 availability zones across 29 regions, with new data centres planned in Brazil, France, and the Netherlands. Eric Wan, vice president of Alibaba Cloud International, emphasized the Middle East's "collaborative ecosystem" as a catalyst for AI adoption, enabling both private and public sector innovation.

Financially, Alibaba's Q1 FY26 results showed total revenue of $34.6 billion, driven by a 10% rise in e-commerce revenue and surging cloud sales. Despite lower adjusted EBITDA and losses in its quick commerce unit, the stock commands a Strong Buy consensus from analysts, with 19 Buy ratings and an average price target of $196.32-implying a 17.69% upside. TipRanks' AI Analyst rates Alibaba a 75/100 with an Outperform rating, citing a $179 price target.

The geopolitical balancing act between U.S. and Chinese interests remains a key theme. The UAE, while deepening AI ties with the U.S., continues to maintain its status as China's largest trading partner. Alibaba's presence in the UAE-alongside rivals like Huawei-highlights the region's role as a bridge between tech powers. Meanwhile, the Trump administration's easing of AI chip export rules could further boost the UAE's ambitions, though concerns over technology diversion persist.

Challenges linger, however. Alibaba's quick commerce division, which aims to deliver products within an hour, reported losses amid fierce competition from Meituan and JD.com. Additionally, the AI campus deal faces scrutiny over U.S. export controls, with no clear timeline for resolution. Analysts at Baird and Jefferies have raised price targets to $174 and $230, respectively, citing Alibaba's AI investments and cloud momentum.

Looking ahead, Alibaba plans to leverage its Tongyi Qianwen large language model to expand AI-driven services, with management aiming to keep cloud growth above market averages. The company's global footprint expansion, including planned data centres in Japan, South Korea, and Mexico, underscores its long-term vision to rival U.S. and Chinese tech giants.

[1] Alibaba (BABA) Stock Doubles in 2025 as Dubai Data Centre ... (https://blockonomi.com/alibaba-baba-stock-doubles-in-2025-as-dubai-data-centre-opens-for-business/)

[2] Alibaba Cloud to launch data centers in eight locations in coming ... (https://www.datacenterdynamics.com/en/news/alibaba-cloud-to-launch-data-centers-in-eight-locations-in-coming-year/)

[3] UAE to build biggest AI campus outside US in Trump ... (https://www.reuters.com/world/china/uae-set-deepen-ai-links-with-united-states-after-past-curbs-over-china-2025-05-15/)

[4] Artificial Intelligence: US-UAE AI Campus Deal Faces ... (https://telecom.economictimes.indiatimes.com/news/internet/us-uae-ai-campus-deal-faces-security-hurdles-amid-concerns-over-china-ties/121687350)

[6] UAE to build biggest AI campus outside US in Trump deal ... - CNA (https://www.channelnewsasia.com/world/uae-build-biggest-ai-campus-outside-us-trump-deal-bypassing-past-china-worries-5133556)

[7] Alibaba (BABA) June quarter 2025 earnings report - CNBC (https://www.cnbc.com/2025/08/29/alibaba-baba-june-quarter-2025-earnings-report.html?msockid=0dce51b17fb76a89304a47347e6b6bc9)

[9] Growth or Bubble? Analyzing Alibaba's Surge (https://www.timothysykes.com/news/alibaba-group-holding-limited-baba-news-2025_10_02/)