(Bloomberg) — Alibaba Group Holding Ltd. is reclaiming its place as one of investors’ favorite Chinese technology stocks, on bets it can beat rivals in the combative artificial intelligence market. <\/p>\n
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Its shares have surged 36% in Hong Kong this quarter, topping the Hang Seng Tech Index in a rally ahead of its results due later Thursday. Alibaba is on track for its biggest quarterly outperformance against Tencent Holdings Ltd. since early 2025. <\/p>\n
A key difference is that Tencent is focusing its AI strategy on its social media and content businesses while Alibaba spends heavily across its generative model, cloud and chip operations. Alibaba has also started to see accelerating cloud growth. It’s even starting to steal back the spotlight from upstart model makers like Z.AI Co. that captured attention earlier this year. <\/p>\n
“Alibaba’s AI investments have been effective in reviving both investor interest in the stock and user engagement across its broader ecosystem,” said Gary Tan, a portfolio manager at Allspring Global Investments. Clear chances for the company to make money have “helped rekindle investor interest,” he said. <\/p>\n
Alibaba was an early winner in China’s AI stock boom but fell behind as competitors gained attention with new listings and technological breakthroughs. Its resurgence comes as a global rush to China’s cheaper AI offerings helps its open-weight Qwen models gain traction with users. <\/p>\n
Advances in the AI arena have also helped Alibaba reframe its narrative from an online retail giant struggling with sluggish domestic consumption to a winning technology platform. The company is expected to report 8.4% growth in revenue for the June quarter, the fastest in almost three years, according to data compiled by Bloomberg. <\/p>\n
Analysts project a profit decline amid continued huge outlays on its various businesses. Among peers, Tencent and Baidu Inc. saw their stocks decline in the wake of recent results, which disappointed the market. <\/p>\n
Alibaba’s earnings may be “better than feared” thanks to narrower losses tied to food delivery and quick commerce investment, along with revenue acceleration and margin increase in its cloud business, JPMorgan Chase & Co. analyst Alex Yao wrote in note. <\/p>\n
Shares of Alibaba rose as much as 2.3% in Hong Kong on Thursday ahead of its results. Traders have been applauding its AI shift, awarding the stock a consistent valuation premium to Tencent’s this year for the first time in more than a decade. <\/p>\n
Rapid rollouts from DeepSeek’s V4 to Moonshot AI Inc.’s Kimi K3 are said to be creating a “model\u2011agnostic” landscape where enterprises pick and choose among different systems based on cost and performance. As such, the battleground is seen shifting to platforms and infrastructure, where Alibaba is seen with an advantage. <\/p>\n
The company’s cloud operation has established a lead over competitors, with estimates from research Omdia showing it with 37% market share in the fourth quarter of 2025, compared with 17% for Huawei Technologies Co. and 10% for Tencent. <\/p>\n
Alibaba also designs some of its own chips. That’s on top of its vast product offerings, from the Qwen app for consumers to coding tools and enterprise agents for developers. <\/p>\n
“We believe long-term success will require immense resources and a loyal customer base,” Citigroup Inc. analyst Alicia Yap wrote in note. “Consequently, companies with full-stack capabilities, from chips and cloud infrastructure to models and applications, like Alibaba, are better positioned to lead.” <\/p>\n
(Updates data as of Thursday’s early trading) <\/p>\n
Most Read from Bloomberg Businessweek <\/p>\n
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