Chinese e-commerce giant Alibaba highlighted its AI ambitions as it reported strong results for its third quarter. This fueled hopes that it will become a leader in AI, and shares of the dual-listed company were up 12.7% in Hong Kong as of 11:30 a.m. Friday, while surging 8.1% in New York overnight.
On Thursday, the company announced that net income jumped 333% to 49 billion yuan in the final three months of 2024 thanks to income from operations and changes in the value of its equity investments. Revenue rose a better-than-expected 8% to 280 billion yuan ($38.4 billion) from a year earlier.
Cofounder Jack Ma, who stepped down as Alibaba chairman in 2019 but still partially derives his wealth from a stake in the company, added almost $1 billion to his net worth, making him one of the world’s five biggest wealth gainers on Thursday, according to the Forbes’s Real-Time Billionaire’s List.
With yesterday’s rally in New York, Alibaba shares have surged over 60% so far this year, adding $120 billion to its market capitalization in the U.S. Although the $323 billion company is still down over 50% from a peak achieved in 2020, Thursday’s call with analysts gave investors plenty of reason for hope.
On the call, CEO Eddie Wu outlined a future in which Alibaba Cloud, which provides the computing power needed for AI, will benefit from the proliferation of related applications, especially after China’s DeepSeek released in January a highly affordable model. Wu, one of Ma’s most trusted lieutenants along with Chairman Joe Tsai, said the company’s primary objective is pursuing artificial general intelligence (AGI), which refers to AI that matches or surpasses human intelligence.
“We aim to continue to develop models that extend the boundaries of intelligence, ” Wu said. He added that he foresees a future in which AI will take over more human jobs.
Alibaba’s investment in AI and related infrastructure over the next three years will exceed what it has spent over the past decade, according to Wu, who didn’t specify amounts. Wang Xiaoyan, a Shanghai-based analyst at research firm 86 Research, says the “resolute” investment will help Alibaba maintain a lead over rivals and give investors confidence in growth over the next five to ten years.
Alibaba will soon release another AI model, after launching in late January its Qwen 2.5-Max model, which the company says outperforms DeepSeek and some other OpenAI models.
The investment in AI is necessary for long-term growth, wrote Thomas Chong, an analyst at investment bank Jefferies, in a Thursday research note. Alibaba is now an “AI investment,” analysts at Hong Kong-based research firm Blue Lotus Capital Advisors wrote in a Friday research note.
The Blue Lotus analysts agree that Alibaba Cloud, which has a 30 to 40% share of China’s public cloud market, will host more AI applications down the road, according to the research note.
Western companies looking to introduce AI products in China are likely to work with Alibaba, especially since Apple plans to use the company’s models to power AI services for iPhone users in the country, Chelsey Tam, a Hong Kong-based senior equity analyst at Morningstar, wrote in a Friday research note.
“We believe investors are anticipating stronger growth from its cloud unit,” Tam wrote.
For Alibaba, this could be a comeback after years of intense government pressure, which began after Ma criticized China’s financial regulatory system in 2020. He was among the private sector entrepreneurs who met Chinese President Xi Jinping on Monday. This was widely regarded as a sign of support and government encouragement to private enterprises to grow faster amid economic problems at home and rising tensions with the U.S.