Alibaba Balances E-Commerce Strength With AI Leadership to Reinvent Valuation

Alibaba Group Holdings (NYSE:BABA) shares surged to their highest level in nearly four years after the Chinese tech giant announced plans to significantly increase its artificial intelligence spending beyond the originally planned $53 billion investment. The company also unveiled its most powerful language model yet, the Qwen3-Max, containing over 1 trillion parameters. CEO Eddie Wu revealed that Alibaba will exceed its February commitment of 380 billion yuan ($53 billion) for AI infrastructure development over three years, though he did not specify the additional budget amount.

Alibaba’s Trillion-Parameter Model Marks Major Milestone

Wu’s announcement at the Apsara Conference in Hangzhou reflects Alibaba’s commitment to compete in the global AI race, where he anticipates worldwide investment reaching $4 trillion over the next five years. The company’s cloud division, already operating from the US to Australia, plans to launch its first data centers in Brazil, France, and the Netherlands, with additional facilities planned for Mexico, Japan, South Korea, Malaysia, and Dubai. This expansion aligns with Alibaba’s goal to become “the world’s leading full-stack AI service provider,” encompassing computing power, models, and infrastructure.

The new Qwen3-Max model represents a significant technological advancement with over 1 trillion parameters, demonstrating particular strength in code generation and autonomous agent capabilities. This positions Alibaba to compete directly with global AI leaders while addressing the challenge of US export controls limiting access to Nvidia’s (NASDAQ:NVDA) AI processors. The company has secured high-profile customers for its AI chips, including China Unicom, which will deploy Alibaba’s T-Head AI accelerators. Bloomberg Intelligence estimates that total capital expenditure on AI infrastructure by major Chinese tech companies including Alibaba, Tencent, Baidu, and JD.com could reach $32 billion in 2025 alone, up from $13 billion in 2023.

Alibaba’s AI Spending Plans Fuel Investor Optimism

BABA shares advanced 9% to $178.22 in premarket trading at 6:16 AM EDT, building on the previous day’s close of $163.08. The stock has delivered exceptional performance this year, with YTD returns of 97.12% compared to the Hang Seng Index’s 32.20% gain. Over the past year, BABA has returned 84.08%, significantly outperforming its benchmark index. The company currently trades at a P/E ratio of 18.79 with a market capitalization of $393.97 billion, positioning it as a dominant player in the internet retail sector alongside competitors like Amazon (NASDAQ:AMZN) and JD.com (NASDAQ:JD).

Recent financial highlights show strong fundamentals with a profit margin of 14.63% and return on equity of 13.45%. The company reported revenue of 1 trillion yuan with diluted earnings per share of $8.68. Alibaba maintains a healthy balance sheet with total cash of 416.41 billion yuan and a relatively low debt-to-equity ratio of 23.17%. Analyst recommendations remain positive, with price targets ranging from $131.39 to $195.41, and the average target of $166.79 suggesting modest upside potential from current levels.

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