Alibaba shares soar over $3.2 billion AI funding, chip strategy

Alibaba Group Holding Ltd.’s stock jumped the most in about two weeks as the company rolled out a series of initiatives aimed at strengthening its position in China’s booming artificial intelligence sector.

Shares rose more than 7% in early Hong Kong trading, following gains in the U.S., bringing Alibaba’s year-to-date rally to over 80%, according to Bloomberg.

The surge reflects investor enthusiasm over the company’s aggressive expansion into AI.

This week, Alibaba raised $3.2 billion through convertible bonds to fund the country’s largest AI infrastructure budget and cloud services. 

The company also unveiled updates to its flagship Qwen-series AI models, designed to compete with rivals DeepSeek and OpenAI. 

Alibaba and Baidu Inc. have begun using in-house chips for AI training, replacing costly Nvidia accelerators. Baidu’s stock climbed nearly 13% in Hong Kong to its highest level since October 2024.

Alibaba is staging a comeback after years of regulatory scrutiny that hit its internet business. Co-founded by Jack Ma, the company has emerged this year as a frontrunner in China’s AI frenzy and has declared its pursuit of artificial general intelligence—the ultimate goal for many tech firms.

The company’s recent moves align with broader optimism about AI’s potential to transform industries and economies. Oracle Corp. fueled sector-wide enthusiasm this week after issuing a strong outlook for global AI spending.

“Alibaba’s recent moves have shifted investors’ focus completely to its AI potential, offsetting concerns about its price wars in food delivery,” said Paul Pong, managing director at Pegasus Fund Managers. “With the capability of producing its own chips, it should create more growth drivers.”

Alibaba’s stock gains come even as the company ramps up competition in its core e-commerce and local services businesses. This week, it announced an additional 1 billion yuan ($140 million) in incentives to attract traffic to a popular online service, intensifying the battle with JD.com Inc. and Meituan.

Analysts note that while this approach supports growth, it may erode margins, especially as AI monetisation remains uncertain.

Alibaba’s new AI models — including Qwen3-Next and the 1-trillion-parameter Qwen-3-Max-Preview — are expected to bolster demand for cloud services. However, returns in this segment are likely to remain low due to slim margins and high capital costs. Adjusted quarterly EBITA for the cloud intelligence division rose by only $86 million in the 12 months ending June 2025. Bloomberg analysts Robert Lea and Jasmine Lyu note that Tencent is better positioned to deliver near-term AI returns.

By Tamilla Hasanova