Alibaba shares see biggest jump since Feb on AI, cloud growth

Alibaba shares jumped nearly 15% in Hong Kong, marking the largest intraday gain since February.

The surge came after the company reported strong growth in AI-related product revenue and a 26% rise in cloud sales, despite only a 2% increase in overall revenue and a drop in operating income.

Cloud and AI businesses have become a focus for investors as Alibaba competes with JD.com and Meituan, both of which posted weaker results.

The company said investments in food delivery and instant commerce drove 20% user growth on Taobao, with its quick commerce unit reaching scale to improve efficiency.

Alibaba has also updated its open-source video AI model and is investing heavily in AI to keep pace with Baidu and Tencent in China’s fast-moving AI sector.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Chinese tech giants are sacrificing short-term profits for AI market dominance

The price war in China’s e-commerce sector highlights how companies are willing to endure significant losses to secure future positioning in AI-driven markets.

JD.com’s profit halved this quarter while Meituan warned of major losses, triggering a $27 billion selloff across the three companies just last week1.

Meanwhile, Alibaba’s stock surged 15% as investors viewed its AI strategy as a promising path forward, even though the company’s e-commerce margins declined 14% year-over-year due to the pricing battle2.

This trend shows a broader shift in Chinese tech, where companies are prioritizing building AI capabilities that could shape the next decade of competition over immediate profitability.

Alibaba’s commitment of $53 billion over three years to AI infrastructure demonstrates the seriousness of this transition3.

2️⃣ Cloud services are becoming the new profit engine as traditional e-commerce margins compress

Alibaba’s financial results highlight a significant business model transformation happening across Chinese tech companies.

While the company’s overall operating income declined 3%, its cloud division grew 26%, with AI-related products now accounting for 20% of external cloud revenue2.