Alibaba Shares Rise 8% as Company Exceeds Projected AI Spending Threshold

Alibaba's AI Investments Boost Stock, But Profit Misses Forecasts

Shares of US-listed Chinese giant Alibaba Group Holding Ltd. surged nearly 8% on Wednesday after leadership provided a clear three-to-five-year outlook for artificial intelligence returns. The firm anticipates exceeding its original 380 billion yuan ($55.96 billion) three-year AI investment plan, as early returns encourage a rapid expansion of cloud-computing capacity.

Alibaba's Cloud Intelligence Group saw revenue climb 38% to 41.63 billion yuan ($6.13 billion), slightly outpacing the previous quarter's growth. However, the company missed fourth-quarter profit forecasts. Alibaba has yet to specify a new spending target to replace the one set last year.

The company's AI investments are beginning to pay off commercially, with AI products representing 30% of external cloud revenue. This figure is expected to surpass 50% in roughly a year as AI becomes the primary growth catalyst. Alibaba has also enhanced its Qwen chatbot, enabling users to shop on Taobao and Tmall through conversational agents rather than traditional listings.

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In contrast, rival Tencent Holdings Ltd.'s revenue for the March quarter fell short of expectations, intensifying the pressure on its high-stakes artificial intelligence pivot. Tencent's stock gained 5.75%, or $3.35, at $61.65 in New York. The Shenzhen-based giant reported a 9% rise in revenue to 196.5 billion yuan ($28.9 billion), missing the analyst consensus of 199.4 billion yuan.

Despite the revenue miss, net income grew to 58.1 billion yuan, slightly outperforming the 57.8 billion yuan forecast. This mixed financial result may deepen investor skepticism regarding the monetization timeline for Tencent's AI initiatives. To keep pace with rivals, the company has pledged to more than double its AI spending this year, targeting a budget in excess of 36 billion yuan.

At 12:58 p.m. EDT in New York, Alibaba Group Holding Ltd. stock rose 7.93%, or $10.69, at $145.47. Adjusted earnings per American Depository Share fell to 0.62 yuan, significantly trailing the estimated 5.79 yuan. However, executive Eddie Wu projected higher margins for Alibaba Cloud within the next two quarters, suggesting current investments will eventually drive profitability.

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To accelerate profitability, the company recently decoupled its AI operations from its cloud arm, placing Wu in charge of the specialized "Alibaba Token Hub." Executives remain confident that quick commerce unit economics will turn positive by the end of fiscal year 2027, citing improvements in user engagement and monetization.