Alibaba has been through a lot over the past few years. Weak consumer spending made its e-commerce business look tired, and newer AI startups kept stealing the spotlight.
Now the tables have turned. Alibaba's Hong Kong shares are up 34% this quarter, beating the Hang Seng Tech Index heading into its earnings report this Thursday. That would mark the largest quarterly gap over rival Tencent since early 2025.
The story here is a simple one: AI changed how investors see Alibaba. It is no longer just a shopping company struggling to grow. It is a tech platform with its hands in generative AI models, cloud services, and even chip design.
That shift has pulled attention away from startups like Z.AI Co., which drew a lot of buzz earlier this year. Alibaba had actually led China's first AI stock boom, then slipped as competitors launched newer models. But demand for China's low-cost AI has brought people back to its open-weight Qwen models, which developers can download and build on for free.
The numbers show why investors are excited. Bloomberg-compiled forecasts call for 8.4% revenue growth in Alibaba's June quarter, which would be the fastest pace in nearly three years. That said, analysts still expect profit to fall because the company is spending heavily. Tencent and Baidu shares both dropped after their recent earnings disappointed, which makes Alibaba's run stand out even more.
The catch: the market is pricing in a lot of good news already. Alibaba's valuation premium over Tencent has held for a stretch not seen in over ten years, so Thursday's report needs to deliver.
The key difference between Alibaba and its rivals comes down to focus. Tencent is putting its AI effort into social media and content. That full-stack approach matters because the AI race is shifting.
Quick launches of DeepSeek's V4 and Moonshot AI Inc.'s Kimi K3 are pushing buyers to choose AI systems based on cost and performance. Competition is moving toward platforms and infrastructure rather than just who has the flashiest model.
Alibaba's cloud business is a big part of the pitch. Omdia estimates Alibaba held 37% of the cloud market in the fourth quarter of 2025. Huawei had 17% and Tencent had 10%. That kind of lead gives Alibaba a built-in customer base for its AI tools.
The company also designs some chips in-house and offers the Qwen app to consumers. Additionally, Alibaba provides developers with programming utilities and business-oriented automation features. Alibaba's AI models have surpassed 3 billion downloads, putting them ahead of Meta and Google. Citigroup analyst Alicia Yap wrote that companies with full-stack capabilities, from chips to cloud infrastructure to models and applications, are better positioned to lead.
JPMorgan analyst Alex Yao expects Alibaba's earnings to come in "better than feared." He points to narrowing losses in food delivery and quick commerce, along with improving cloud revenue and margins. Allspring's Gary Tan said Alibaba's clear opportunities to make money have "rekindled investor interest."
But the real test comes Thursday. Investors will look for concrete evidence that the AI transformation is showing up in actual sales, not just buzz.
The bigger picture is worth keeping in mind. China's AI race is moving fast, and the winners will be the companies that can build the whole stack, not just one piece of it. Alibaba's bet is that its cloud lead, its chip work, and its open models add up to something rivals cannot easily copy.
For your portfolio, the takeaway is less about Alibaba specifically and more about how quickly AI can remake a company's story. A business written off as a slow-growth retailer can become a market leader in a matter of months when the right technology wave comes along. That cuts both ways, of course.
The same wave that lifts one stock can sink another, and the companies that win are not always the ones with the most headlines. They are the ones with the infrastructure to back it up.