Alibaba’s AI Ambitions: A High-Stakes Push for Growth

Alibaba is aggressively pursuing a new strategic narrative, with artificial intelligence at its core. While the company's shares have faced recent pressure, two significant developments emerged this week: a surge in popularity for its AI application and progress in securing critical hardware. However, the substantial costs associated with this growth strategy are prompting investor caution.

A key infrastructure constraint may be loosening for China's tech giants. According to reports, Chinese regulators have approved the purchase of more than 400,000 Nvidia H200 chips by a consortium that includes Alibaba, Tencent, and ByteDance. This authorization addresses a major market concern, as access to high-performance processors is essential for training and developing large AI models, especially amid ongoing export controls. For Alibaba, this represents a crucial step in ensuring it has the necessary computational power to compete.

Qwen's Download Dominance Driven by Promotions

Alibaba's large language model app, Qwen, recently claimed the top spot for free downloads on China's Apple App Store. This spike was fueled by an extensive Lunar New Year promotion offering users discounts and perks, including free milk tea through partner chains. Market data cited in reports indicates that over 10 million AI-powered orders were processed in just nine hours. Demand was so intense it caused temporary system outages due to overload. While this demonstrates the campaign's reach, it also highlights the company's heavy reliance on financial incentives to acquire users.

The competitive landscape is reacting swiftly. Tencent's WeChat reportedly blocked links to the Qwen promotion, citing "high-frequency, disruptive sharing." Meanwhile, rivals like Baidu and Tencent are also investing billions of yuan in similar incentive programs for their own AI assistants, signaling an intensifying battle for market share in China's AI sector.

Should investors sell immediately? Or is it worth buying Alibaba?

A Prestigious Platform and Institutional Skepticism

In a move to boost its international AI profile, Alibaba Cloud introduced new Qwen tools for the 2026 Winter Olympics in Milano Cortina. This integration marks the first time a large language model will be part of the Games' digital infrastructure, serving as a prestige project to showcase the company's technological capabilities.

Despite these advancements, market sentiment remains divided. Recent filings revealed that Federated Hermes Inc. slashed its position in Alibaba by 91.9% in the third quarter, selling over 70,000 shares. This aligns with a broader investor focus that acknowledges product progress but remains wary of short-term costs and risks.

Consequently, the central question for Alibaba is not the current hype but the path to profitability. The market is scrutinizing whether the influx of Qwen users can be profitably monetized or if the high subsidy costs will pressure margins in coming quarters. This caution is reflected in the share price, which at €136.20 is down approximately 5.9% over the past seven days.