Fiery Flash: Alibaba

This week's Fiery Flash shines the spotlight on Alibaba Group, which has seen a remarkable upswing in its stock price, hitting a three-year high. Over the past week, Alibaba’s shares jumped 11.6%, pushing its year-to-date  gains to an impressive 68.1%. The rally comes amid a series of positive catalysts: strong quarterly earnings, aggressive AI investments, and strategic partnerships all boosted by a broader rebound in Chinese tech stocks. Since November 2024 investor confidence has been further lifted by Beijing’s expansive monetary stimulus, growing market speculation that President Trump may pursue a new trade deal with China, and the emergence of AI players like DeepSeek, helping to narrow the valuation gap between Chinese tech firms and their U.S. peers.

 

Founded in 1999 by Jack Ma, Alibaba has evolved from a modest online marketplace into a global leader in e-commerce and technology. The company's diverse portfolio encompasses online retail, cloud computing, digital media, and financial services, solidifying its presence both in China and internationally.

 

Yesterday, Alibaba released its third-quarter results, showcasing solid growth that exceeded market expectations. Revenue rose by 8% to $38.6 billion, while net income jumped to $6.7 billion, beating analyst forecasts by a wide margin. The performance was fueled by an uptick in domestic e-commerce sales and a robust 13% increase in cloud computing revenue, highlighting the company’s resilience and strategic focus on high-growth segments. CEO Eddie Wu also announced plans to significantly increase investments in AI and cloud computing over the next three years, aiming to achieve artificial general intelligence. Last week, the news also emerged that Alibaba has partnered with Apple to integrate AI features into iPhones sold in China. This collaboration is expected to enhance user experience and expand Alibaba's AI applications.

 

Since early september the Chinese technology sector has seen a resurgence, with the Hang Seng Tech Index rising by 36%. Several factors have contributed to this positive trend:

• Monetary stimulus: China's central bank has pledged robust financial support to promote the healthy development of the private economy, aiming to improve financing channels for private enterprises.
• Trade relations: U.S. President Donald Trump has indicated the possibility of reaching a new trade deal with China, signaling a potential easing of geopolitical tensions.
• Technological advancements: The emergence of companies like DeepSeek has bolstered confidence in Chinese tech stocks, reducing their undervaluation compared to U.S. peers.
• Government engagement: In a recent symposium, President Xi Jinping met with leading Chinese tech entrepreneurs, including Alibaba's Jack Ma, signaling a renewed collaboration between the government and private tech sector. This engagement is reminiscent of President Trump's interactions with U.S. tech bro’s, such as Elon Musk and Mark Zuckerberg, aiming to strengthen public-private partnerships in technology.

 

So Alibaba’s fiery flash reflects a blend of operational improvements and market-driven optimism. Strong earnings, growth in e-commerce and cloud computing, and ambitious AI investments showcase real progress. However, a significant part of the recent multiple expansion is also hinged on speculation, driven by China’s monetary stimulus, hopes for a U.S.-China trade deal, and renewed confidence in Chinese tech. While Alibaba is well-positioned to benefit from these trends, sustaining its momentum will require continued execution, especially as some of the market enthusiasm remains speculative.