Alibaba Shares Face Volatility Amid Pentagon List Confusion

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A week marked by significant product announcements for Alibaba took an unexpected turn due to a brief and confusing action by the U.S. Department of Defense. The Chinese tech giant found itself temporarily placed on a Pentagon list of companies allegedly supporting China's military, a designation that was retracted without explanation roughly an hour later. This incident triggered a decline in the company's share price and prompted a strong legal threat from Alibaba.

The market is now looking ahead to Alibaba's quarterly earnings report, scheduled for February 19. It remains to be seen whether company executives will comment further on the Pentagon episode during their presentation. This situation unfolds against a backdrop where the Trump administration has reportedly suspended several national security actions against Beijing, following a trade truce agreed in October. A visit to China by President Trump is anticipated in April.

The immediate financial impact of the short-lived listing was clear. On February 16, Alibaba's stock listed in Hong Kong fell by more than 3%. Shares of other Chinese firms named on the same list, including Baidu and BYD, also retreated.

Alibaba issued a sharp rebuttal to the Pentagon's initial move. A company spokesperson stated, "Alibaba is not a Chinese military company and is not part of any 'military-civil fusion' strategy. We will use all available legal tools to challenge any attempts to misrepresent our business."

AI Launch Coincides with Lunar New Year

Separately, Alibaba made a major stride in artificial intelligence. On Monday, the eve of the Chinese Lunar New Year, the company unveiled its latest Qwen3.5 model. This AI system, boasting 397 billion parameters and support for 201 languages and dialects, is designed to process text, images, and video simultaneously. A key focus is on developing "AI agents"—systems capable of autonomously executing multi-step tasks.

The company is targeting developers by offering an open-weight version, which allows for local modification and operation on a user's own infrastructure. Lin Junyang, the technical lead for the Qwen team, announced plans to release additional open-weight models during the holiday period. This launch comes just one week after Alibaba presented RynnBrain, a separate model specifically engineered for robotics applications.

Marketing Push Tests System Limits

In early February, Alibaba initiated a promotional campaign for its Qwen chatbot, offering vouchers worth a total of 3 billion yuan (approximately $433 million USD). The consumer response was overwhelming, with 10 million orders received within just nine hours. The surge in demand caused the system to crash. The chatbot itself posted on the Weibo social platform, acknowledging it was overloaded and asking users for patience. The vouchers remain valid until February 28.

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