Why BABA Stock Is Up in Premarket: AI Spending and New Model Launch

Alibaba Group Holding Limited (BABA) has become one of the most compelling stories in the AI-driven economy, with its shares surging 8–9% in U.S. premarket trading on September 24, 2025Alibaba shares jump 9% in U.S. premarket after CEO unveils new AI products and spending plans^[1]. This rally followed a bold announcement: a significant escalation of AI investment, including the launch of Qwen3-Max, a 1-trillion-parameter model, and a global expansion of data centersAlibaba consolidates e-commerce platforms as AI drives growth^[2]. For investors, the question is no longer whether Alibaba can compete in the AI race but how its strategic bets will reshape e-commerce scalability and profit margins.

The AI Bet: From Infrastructure to Superintelligence

Alibaba's CEO, Eddie Wu, has positioned AI as the “electricity of the future,” a metaphor that underscores the company's ambition to dominate the next decade of digital infrastructureAlibaba’s Core Businesses Reignite Growth as AI Strategy Delivers ...^[3]. The recent $53 billion, three-year AI investment plan—now expected to exceed previous commitments—targets not just hardware but the entire AI value chainAlibaba accelerates AI-driven growth in Q1 - by CIW Team^[4]. This includes training advanced models like Qwen3-Max, which excels in code generation and autonomous agent tasks, and deploying them via Alibaba Cloud to businesses worldwideAlibaba launches Qwen3-Max AI model with more than 1 trillion parameters^[5].

The significance of Qwen3-Max lies in its ability to reduce human intervention in complex workflows. For example, the model can autonomously optimize supply chain logistics or generate marketing copy, tasks that previously required teams of engineers and marketersAlibaba Cloud targets full-stack AI dominance^[6]. By automating these functions, Alibaba is not only cutting operational costs but also enabling small and medium-sized businesses (SMBs) to adopt AI at scale. This democratization of AI tools aligns with Alibaba's vision of becoming a “full-stack AI service provider,” offering everything from cloud computing to pre-trained modelsAlibaba’s Bold $53 Billion AI Expansion^[7].

E-Commerce Scalability: The AI-Driven Flywheel

Alibaba's e-commerce platforms—Taobao, Tmall, Ele.me, and Fliggy—have long been the backbone of its business. But the recent integration of these platforms into a unified consumer infrastructure, powered by AI, is a game-changerAlibaba Q1 Results Deliver Strong Growth in AI and Quick Commerce^[8]. By consolidating supply chains, user bases, and loyalty programs, Alibaba has created a flywheel effect: increased user engagement on one platform (e.g., Taobao's AI-powered search) drives traffic to others (e.g., Ele.me for food delivery), creating cross-subsidized growthAlibaba consolidates e-commerce platforms as AI drives growth^[9].

The results are already visible. Taobao's Instant Commerce initiative, which leverages AI to optimize delivery routes and inventory management, drove a 25% year-over-year increase in monthly active consumersAlibaba’s Core Businesses Reignite Growth as AI Strategy Delivers ...^[10]. Meanwhile, AI-driven recommendation systems have boosted conversion rates by 23%, and generative AI tools have cut merchant listing setup time by 45%How AI is Driving Alibaba’s Revenue Growth in 2025^[11]. These efficiencies are not just incremental—they are structural, enabling Alibaba to scale its e-commerce operations without proportionally increasing costs.

Profit margins, meanwhile, are seeing a renaissance. Alibaba's operating income has surged due to reduced share-based compensation and improved logistics coordinationAlibaba Q1 FY2026 Earnings Report: Cloud Revenue Jumps 26^[12]. The company's AI-related revenue now accounts for 20% of external cloud customer revenue, with triple-digit growth in AI products for the eighth consecutive quarterAlibaba’s AI-Driven Cloud Surge^[13]. This is a critical shift: AI is no longer a cost center but a profit engine.

Global Expansion: Data Centers as Strategic Assets

Alibaba's AI ambitions are not confined to China. The company is launching data centers in Brazil, France, and the Netherlands, with plans for Mexico, Japan, and Dubai in 2026Alibaba Launches Qwen3-Max: Brings Multimodal Tools^[14]. These hubs will serve as regional nodes for its full-stack AI services, reducing latency for global clients and enabling localized AI training. For example, a European retailer using Alibaba Cloud's AI tools can now process customer data in Frankfurt rather than Singapore, complying with GDPR while improving performanceAlibaba’s Bold $53 Billion AI Expansion^[15].

This global footprint also strengthens Alibaba's position in international commerce. Its AliExpress and Trendyol platforms saw a 32% year-over-year revenue increase in the December quarter, driven by AI-powered pricing algorithms and demand forecastingAlibaba Q1 Results Deliver Strong Growth in AI and Quick Commerce^[16]. Strategic partnerships, such as the Shinsegae joint venture in South Korea, further amplify this reachAlibaba’s Core Businesses Reignite Growth as AI Strategy Delivers ...^[17].

Risks and Rewards: Balancing Short-Term Costs with Long-Term Gains

Critics argue that Alibaba's aggressive AI spending—coupled with investments in quick commerce and cloud infrastructure—has eroded free cash flowAlibaba accelerates AI-driven growth in Q1 - by CIW Team^[18]. However, this trade-off is intentional. By front-loading costs to build AI infrastructure, Alibaba is positioning itself to capture long-term value as AI adoption becomes universal. The company's 88VIP membership program, now exceeding 53 million subscribers, is a testament to this strategy: high-value customers are willing to pay premiums for AI-enhanced services like personalized recommendations and instant deliveryAlibaba consolidates e-commerce platforms as AI drives growth^[19].

Conclusion: The AI-First Future

Alibaba's stock surge is more than a reaction to a single announcement—it reflects investor confidence in a company that is redefining the boundaries of AI and e-commerce. By investing heavily in models like Qwen3-Max, full-stack AI services, and global data centers, Alibaba is not just scaling its operations but reengineering its profit model. For investors, the key takeaway is clear: in an era where AI is the new electricity, Alibaba is both the grid and the generator.