- Alibaba's U.S. listed-shares have quietly risen nearly 60% this year, adding more than $100 billion to the company's valuation.
- It's a turnaround from the last few years, which have seen the e-commerce giant's core business under pressure and close scrutiny from the Chinese government.
- The recent achievements have been attributed to Alibaba’s advancements in artificial intelligence, bolstered by the spotlight DeepSeek has cast on China, along with the reappearance of founding figure Jack Ma in the public sphere.
In November 2023, Jack Ma sent out an internal memorandum within Alibaba, encouraging the vast online shopping behemoth he co-founded to “redirect its path.” This statement served as a call to action from one of China’s leading technology figures during what has been among the most challenging periods for the firm.
Alibaba’s stock price had dropped close to historic lows as growth slowed down due to increasing rivalry. Leadership shifts were happening rapidly, and the Chinese government continued to monitor the firm closely. Jack Ma remained largely out of the spotlight.
However, his message might have brought renewed optimism to Alibaba—the colossal online marketplace is now experiencing expansion within its primary sector and has emerged as a prominent player in artificial intelligence both in China and internationally, rivaling companies such as OpenAI and DeepSeek. Additionally, Alibaba has regained approval from the Chinese government.
Alibaba's American-listed shares have silently climbed almost 60% this year, boosting the firm's worth by over $100 billion.
"Chinese technology sector has awakened with Alibaba taking the lead, and investors around the world see this as the optimal route into Chinese tech. We concur; Alibaba is well-positioned to profit from investments in artificial intelligence and cloud computing," stated Dan Ives, who leads global technology research at Wedbush Securities, to DIWIDA.
DIWIDA spoke with Alibaba's chairperson along with a previous executive and several analysts, who provided insights into the transformations occurring within the technology corporation, marking the beginning of its resurgence.
Alibaba's fall
Alibaba’s decline happened quickly. Much of this has been attributed to remarks made by Ma back in October 2020. seemed to critique China's financial overseer .
The remarks did not gain much attention initially. However, days afterward, Alibaba’s stock price reached an all-time peak, pushing its market cap above $858 billion.
Alibaba was capitalizing on a series of successes that had propelled it to become the leading e-commerce entity in China, while also setting its sights on expanding internationally and continuing its growth trajectory. cloud business growing quickly To cap it all, Alibaba subsidiary Ant Group was preparing for an initial public offering that would increase above $34 billion , making it the largest listing in history.
Ant Group, which was likewise established by Ma, is a a financial technology firm that developed Alipay One of the two leading mobile payment systems in China.
Two days prior to Ant Group’s planned listing in both Shanghai and Hong Kong, the IPO was canceled. Initially, Ant pointed out shifts in China's "regulatory landscape."
This was followed by several years of rigorous examination of Ma's business empire and China’s leading tech firms. Authorities cracked down on practices deemed anti-competitive among these giants, resulting in multibillion-dollar penalties for the corporations involved. including Alibaba , forced alterations to Ant Group's framework and brought in a plethora of rules involving numerous aspects of technology.
'Uncertainty and confusion'
In 2021, regulatory oversight was just one of the challenges confronting Alibaba. The company was also grappling with various other problems such as doubts about the robustness of China’s economy, which was attempting to rebound from the effects of the COVID-19 pandemic, along with increasing competitive pressures.
Specifically, newer firms such as Pinduoduo and even Douyin, which is akin to the Chinese variant of TikTok, have been attracting notice in the realm of e-commerce within China.
In March 2023, Alibaba—a vast corporation involved in sectors ranging from food delivery to cloud computing and filmmaking—opted to divide itself into multiple entities. six separate business groups , each capable of securing external financing and going public. Alibaba believed this step would increase the agility of these divisions.
Next was a change in leadership. In June 2023, Alibaba declared that Daniel Zhang, who had been CEO since 2015 and chairman from 2019 , would step down from both roles to focus on the cloud business. But just three months later, Zhang suddenly quit the cloud unit .
Eddie Wu, one of the cofounders of Alibaba, assumed the role of CEO along with leading the cloud division. Another cofounder, Joe Tsai, also remained involved. rose to assume the position of chairman .
It was during one of the most turbulent periods in Alibaba's history.
"During that time period a great sense of uncertainty and confusion hovered over employees. While there was a wait-and-see sort of mentality that set in, the problem was that as time passed, many didn't know just how long that would be," Brian Wong, a former Alibaba executive and author of "The Tao of Alibaba," told DIWIDA.
Initially, China’s economy seemed resilient at the onset of COVID-19; however, once lockdown measures were implemented, circumstances shifted dramatically. The disruption of supply chains coupled with alterations in the economic environment further exacerbated worries about the future direction of the situation.
Joe and Eddie steady the ship
Wu aimed to refocus Alibaba's efforts on its primary e-commerce and cloud sectors while scaling back some of the additional ventures the company had pursued, shifting away from viewing Alibaba as composed of numerous independent units.
Artificial intelligence took precedence, with Wu and Tsai proposing that the firm should embrace a startup mindset to stay competitive.
Big corporations operate slowly due to their overly complex decision-making structures," Tsai stated. "Therefore, we urgently required agility and rapid action. DIWIDACONVERGE LIVE An event held in Singapore at the beginning of this month highlighted that rapid decision-making is crucial for competing against startup competitors.
Tsai mentioned that both he and Wu agreed that their initial task should be to " streamline the company."
Tsai stated, "Rather than discussing Alibaba as six separate business units, we spoke about our organization comprising two main sectors — e-commerce and cloud computing."
This streamlined everything and improved our communication. It’s crucial that we convey this to our staff. They require a straightforward framework in their thoughts so they can progress more quickly.
Tsai mentioned that younger managers were granted the authority to make decisions as well.
"What it essentially entails is allowing them to make certain choices and permitting them to err, thereby enabling them to learn how to rebound from those errors," Tsai further explained.
Wu and Tsai also abandoned intentions to list Cainiao , which belongs to Alibaba’s logistics division, representing a shift from earlier pledges.
Eddie is receiving internal praise for rejuvenating the company by discarding outdated practices and establishing innovative ones. Jack Ma and Joe Tsai initially decided to place their bets on him, and this strategy is now proving successful,” said Duncan Clark, who was an early consultant at Alibaba and currently chairs BDA, via email to DIWIDA.
Changing political winds
Following the cancellation of the Ant Group initial public offering in late 2020, Ma retreated from public life. He became emblematic of Beijing’s efforts to curb the influence of private enterprises and business leaders.
The increased regulatory oversight and governmental examination have also impacted investments. The worth of Chinese technology firms plummeted by billions of dollars as a result. Venture capital funding for startups saw a significant decline. .
In a nation where governmental policies and backing play a crucial role for various industries and businesses, Beijing’s seemingly hostile stance towards private enterprises has cast a shadow over the tech industry. However, as China grapples with economic challenges, the importance of the technology sector in reviving the economy is once again coming into prominence.
And in February of this year, Chinese President Xi Jinping did so. hosted an infrequent gathering with business owners encouraging them to "demonstrate their skills," with remarks interpreted as backing for private enterprises.
Ma from Alibaba, along with several prominent Chinese business leaders and entrepreneurs, attended the event. His presence stood out notably because his corporation has faced intense scrutiny recently, and he hadn’t been spotted within circles of China’s political upper echelons for quite a while now.
Jack Ma’s meeting with Xi Jinping conveyed a strong message about current governmental priorities — both AI advancement and the expansion of private businesses are crucial for China’s economic progress. We also think that Alibaba enjoys backing from Chinese officials,” noted Chelsey Tam, a senior equity analyst atMorningstar, via email toDIWIDA.
The gathering has been beneficial for Alibaba's stock value this year. It seems to have also inspired renewed confidence within the company to both recruit talent and invest further.
"We gained the assurance... to reinvest our profits into capital expenditures and projects as well as expand our workforce," stated Alibaba’s Tsai, referring to the company's announcement in February of a more than $50 billion commitment to AI infrastructure development over the coming three years.
AI success
Much of Alibaba's stock surge this year can be attributed to excitement surrounding DeepSeek and investors examining major Chinese tech companies for their advancements in AI technology.
Among China’s frontrunners, Alibaba introduced its inaugural AI model shortly following the debut of ChatGPT in 2023. Tongyi Qianwen, or Qwen The firm based in Hangzhou has since actively introduced various models enabling activities like generating videos, texts, and images based on user inputs.
Alibaba has released its models as open-source, allowing anybody to access and expand upon them. This approach has played a crucial role in its achievements. Among these modelos, some have gained particular prominence. Most widely-used models on Hugging Face, A worldwide database of AI models is constructed using Qwen.
Tiezheng Wang, a machine learning engineer at Hugging Face, stated to DIWIDA that Alibaba has been regularly unveiling impactful open-source models on Hugging Face starting from early 2023,
Wang stated that Alibaba’s models, encompassing capabilities such as video, image, and text generation, exhibit robust performance across various tasks.
Although Alibaba was among the first in the field of AI models, it was a research paper from a Chinese company that made headlines. DeepSeek this year This compelled everyone to pay attention to the developments happening in China. DeepSeek asserted that their AI model was developed at a significantly lower cost compared to major competitors and utilized less sophisticated technology. Nvidia potato chips, resulting in a worldwide selling spree of stocks.
"DeepSeek was a wake up call that China tech is not just sitting idle on AI and this indirectly benefits Alibaba as the appetite for AI is clear in China," Wedbush Securities' Ives said.
AI competition ramps up
Alibaba’s initial models were introduced earlier than those of DeepSeek. However, competition within China is intensifying. Major technology companies such as Baidu and Tencent are still launching new models.
But there are questions about how Alibaba will make money off open-source AI models that are free. The answer, according to investors, AI experts and the company executives, is Alibaba's cloud computing business.
Open source enables a business to create a developer community around a specific model, enhancing both its functionality and global outreach.
Increased accessibility of AI coupled with rising demand suggests that Alibaba might boost its cloud computing business growth. Essentially, Alibaba can generate revenue from businesses needing to utilize their servers and computational resources for running AI applications, irrespective of whether these applications involve Alibaba’s own models.
"Ours is a cloud computing company that stands to gain significantly from the increasing use of AI since each instance where someone trains a model or performs an inference requires cloud computing resources, and our service provides exactly that—computational power," explained Tsai.
Alibaba's cloud computing business accelerated expansion occurred in the quarter of December from the quarter before.
I believe the main point now is that instead of seeing Alibaba as an e-commerce firm losing both market share and margins, it should be viewed as a major player in the cloud computing and artificial intelligence sectors capitalizing on numerous emerging opportunities," according to Clark at BDA.
This represents an entirely different storyline.