Alibaba’s Strategic Pivot to AI Fuels a Remarkable Stock Recovery

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The Chinese technology conglomerate Alibaba has staged a powerful resurgence in 2025, with its shares surging 86.4% since the start of the year. This performance marks one of the most significant rebounds witnessed across the global technology sector. Driving this impressive turnaround are two core factors: explosive expansion within its cloud computing division and a concerted, aggressive push into artificial intelligence. While the latest financial metrics are undoubtedly strong, market observers are now scrutinizing the long-term sustainability of this growth trajectory.

Financial institutions on Wall Street maintain a bullish outlook. Bernstein SocGen Group has assigned an "Outperform" rating with a price target of $190. JPMorgan Chase is even more optimistic, targeting $230 per share. Morningstar analysts suggest a fair value of $258 is appropriate. The consensus price target stands at approximately $192, indicating a potential upside of around 20% from current trading levels.

This optimism is partly underpinned by Alibaba's ongoing corporate overhaul. The restructuring into distinct, independently-run business units is designed to unlock hidden value and sharpen the company's competitive edge across e-commerce, cloud services, logistics, and digital media. A recent strategic move involved the integration of the Ele.me food delivery service into the Taobao platform, aiming to enhance efficiency in China's fiercely competitive on-demand delivery market.

Cloud Division: The Engine of Growth

Central to the company's recovery is the stellar performance of Alibaba Cloud. For the quarter ending in September, revenue soared by 34% year-over-year. This figure represents a notable acceleration from the 26% growth recorded in the preceding quarter. A standout segment has been its AI-related cloud products, which have now delivered triple-digit growth rates for nine consecutive quarters.

Commanding a dominant 36% market share in its domestic market, Alibaba Cloud is the clear leader in China and a frontrunner across the broader Asia-Pacific region. The surging global demand for AI infrastructure and computing power plays directly into the company's strengths.

Expanding the AI Frontier into Consumer Markets

Alibaba's ambitions extend far beyond enterprise solutions. In November, the company made a strategic foray into the consumer wearables market with the launch of its Quark AI Glasses series. Priced from 1,899 yuan, these smart glasses are powered by Alibaba's proprietary Qwen AI model and are deeply integrated into the company's ecosystem, including platforms like Taobao, Alipay, and Amap.

Features such as real-time translation, AI-assisted meeting notes, and voice control position the product as a potential competitor to offerings from giants like Meta. Industry analysts project the market for AI-powered wearables could expand to over 10 million units sold by 2026.

Simultaneously, the standalone Qwen application experienced a spectacular debut. Within just two weeks of its public beta launch in November, monthly active users skyrocketed by 149% to reach 18.34 million. This explosive growth made Qwen the fastest-growing AI application worldwide at the time.

The Cost of Aggressive Expansion

The aggressive growth strategy, however, has come at a cost to near-term profitability. The company's adjusted EBITA for the September quarter plummeted by 78% compared to the previous quarter. This sharp decline is attributed to substantial investments in its quick commerce initiatives and massive capital expenditure directed toward building out AI infrastructure.

Management has committed to halving the losses in its quick delivery business by October compared to prior months. Despite the profit pressure, total group revenue for the quarter reached 248 billion yuan, surpassing consensus estimates by approximately 3 billion yuan.