Alibaba’s Dual-Pronged Strategy to Cement Its AI Leadership

Alibaba US01609W1027

At the heart of its strategic pivot, Chinese e-commerce and cloud behemoth Alibaba is executing a two-front offensive in artificial intelligence. This move combines ambitious internal restructuring with critical external hardware procurement, aiming to secure its technological future despite near-term profitability pressures.

A significant development is unfolding in Alibaba's supply chain. According to industry reports, Chinese regulators have granted preliminary approval for the company to proceed with detailed plans to acquire Nvidia's advanced H200 graphics processing units. Alibaba has reportedly signaled interest in purchasing more than 200,000 of these units.

While Beijing encourages firms to balance imports with domestic chip procurement, renewed access to this cutting-edge U.S. technology would provide a substantial competitive edge. The H200 chips are considered essential for training the most complex AI models, and securing them could significantly bolster Alibaba's position against rivals like Tencent.

Monetizing the Chip Division

Concurrently, the company is advancing plans to unlock value from its semiconductor unit. T-Head Semiconductor, founded in 2018 to develop specialized processors for data centers and AI workloads, is being prepared for independence. The current strategy involves an initial transfer of partial ownership to employees, followed by a pursuit of a public listing.

Market reaction to this news has been positive. Investors interpret the move as an effort to realize the latent worth of Alibaba's technology assets and to raise capital for the expensive, ongoing development of artificial intelligence capabilities.

Cloud Growth Amidst Profit Compression

Operational results demonstrate the early impact of this strategic focus. The company's cloud computing division reported a 34 percent revenue increase for the second quarter, powered by triple-digit growth in AI-related product sales. The integration of its proprietary AI application, "Qwen," into Alibaba's broader ecosystem is also progressing, creating seamless connections between shopping, payment, and cloud services.

This expansion, however, comes at a cost. Analysts anticipate a nearly 38 percent year-over-year decline in net profit for the current quarter. The investment community appears to be looking beyond this short-term dip; projections for the coming fiscal year forecast a profit rebound of almost 50 percent. In a recent assessment, Bank of America labeled Alibaba's equity as the premier way to gain exposure to the "AI in China" investment theme.

Alibaba's shares are presently trading at 144.60 Euros. Although the stock has seen a modest decline since the start of the year, it maintains a twelve-month gain of more than 68 percent.

The next critical milestone for the company is scheduled for February 19, 2026, when it will announce its quarterly earnings. Market observers will scrutinize whether the heavy infrastructure investments are beginning to translate into monetization and if the timeline for the T-Head initial public offering is becoming more defined.

@ boerse-global.de | US01609W1027 ALIBABA’S