Alibaba and Artificial Intelligence: Pros and Cons of the Stock Exchange Race
The Chinese giant, also in the wake of the new chatbots, rose strongly on the list. High investments put pressure on cash flow
On the one hand, the 56.7 % rise (closing date 6/3/2025) since the launch of DeepSeek's low-cost, open source artificial intelligence (AI). On the other, the huge capitalised investments (Capex) putting pressure on margins. All this with Jack Ma's return to the scene. This is how the recent context of the Chinese technology giant Alibaba can be summarised.
Social object
It is a scenario that - even remembering the thud in the single session on 24 February (-10.2%) - begs the question: why this upward acceleration? To answer this, it is first necessary to recall the corporate purpose of the former Middle Kingdom group. The company - a hi-tech conglomerate that is listed on the Nyse via Adr - divides its business into several areas. In order to grasp the articulation of the business, it can, however, be traced back to four major sectors, even if they do not perfectly correspond to the operating segments indicated in the financial statements. Specifically, these are: Taobao and Tmall Group, Cloud Intelligent Group, Alibaba International Digital Commerce Group and the residual businesses (Other).
The first segment (USD 18.6 billion in revenue in the third quarter of the financial year 2024-2025) basically includes e-commerce in China. Here, most of the revenue comes from advertising and marketing fees on the market places Taobao and Tmall. The second unit - cloud computing, which generated EUR 4.34 billion in revenue in the quarter ending 31 December - is responsible for cloud services and, above all, those related to artificial intelligence. The third front (5.2 billion turnover) is, for its part, focused on e-commerce abroad, exploiting platforms such as AliExpress or Lazada. Finally, the residual sector that can be defined as Other. It includes various activities: from logistics for Alibaba and third parties (3.9 billion in sales) to local services (food deliveries, shipping and transport) to digital media and entertainment. In short: the group is highly articulated.
The AI challenge
Diversification has recently been characterised by an acceleration on the Artificial Intelligence front. In the last quarter, the company, on the one hand, saw the cloud division - which is very closely linked to Ai - grow by 13% and, on the other, was marked by the expansion of products 'augmented' with the new technology, which - the group itself indicates - for the sixth consecutive quarter rose to triple figures in percentage terms. Not only that. In the past two months, Alibaba has scored a double blow on the generative Ia front. First, it launched the new chatbot dubbed Qwen 2.5-VL. It is a Large Language Model with advanced multimodal capabilities (i.e. able to process not only text but also visual data). According to Alibaba, Qwen 2.5-VL would perform better than competing models such as ChatGPT (OpenAi) or LLama (Meta). An efficiency that, according to the group, has contributed to its popularity: the model has been adopted by over 290,000 developers and companies, with derivative solutions already numbering over 90,000.
The second move - which took place last week - concerns another solution (called QwQ-32B) that could compete directly with DeepSeek's chatbot. In this way, Alibaba would also find itself at the forefront of low-cost Ai systems. True! Such claims - particularly those about higher performance - would have to be confirmed by independent third parties. That said, however, it is undeniable how investors have reassessed the technological potential of Alibaba - and China as a whole - in the Artificial Intelligence gold rush. Hence (also) the 'buy' flow on the stock over the last month and a half.
