Hong Kong-listed Alibaba Group has surged 74% in 2025, driven by robust earnings, renewed government backing, and a strategic leap into artificial intelligence with its new QwQ-32B reasoning model.

Alibaba's latest move has caught market attention as its stock jumped 8.4% on Thursday after unveiling the QwQ-32B model—a cutting-edge AI tool designed to rival the performance of Chinese startup DeepSeek’s acclaimed R1 model. Despite boasting only 32 billion parameters compared to DeepSeek’s 671 billion, QwQ-32B leverages advanced reinforcement learning techniques to deliver comparable results in mathematical reasoning, coding, and complex problem-solving.

Key Drivers Behind the Rally

  • Strong Earnings and Recovery:
    Alibaba's recent earnings report revealed an 8% revenue boost for the quarter ending December, bolstering investor confidence. This financial turnaround comes as the company rebounds from past lows, with its market capitalization climbing to $344.31 billion as of early March.

  • AI Innovation to Challenge DeepSeek:
    The launch of QwQ-32B signals Alibaba’s aggressive entry into the AI space, directly challenging DeepSeek’s position. The new model’s efficiency—with a fraction of the computational power required by its rival—has positioned Alibaba as a frontrunner in the rapidly evolving AI arms race.

  • Government Support and Regulatory Shifts:
    Beijing’s renewed commitment to fostering emerging technologies, including AI and next-generation telecom, has provided a much-needed boost to Chinese tech stocks. Recent high-level meetings featuring Alibaba co-founder Jack Ma and key government figures hint at a softening regulatory stance, further fueling the market rally.

Broader Market Impact

The unveiling of QwQ-32B sparked an immediate rally in China’s tech sector, with the Hang Seng Tech Index rising 5.4% on the same day. The broader market recovery is evident in key Chinese stock indices, which have not only halted a three-year losing streak but are also showing strong gains:

  • The CSI 300 Index surged by 14.7% in the previous year.
  • The Shanghai Composite rose 12.8%, while the Hang Seng ended 2024 with a 17.7% annual gain.

Future Outlook

Alibaba’s aggressive AI strategy is underscored by a commitment to invest 380 billion yuan ($52 billion) over the next three years in cloud computing and AI infrastructure. Market analysts believe this massive infusion of capital, coupled with the company’s innovative approach to AI, could drive a sustained tech rally and reshape investor sentiment not only in China but globally.

As Alibaba and DeepSeek continue to push the boundaries of AI, the ongoing race to achieve superior performance at lower costs is set to redefine the competitive landscape of the tech industry. Investors and industry watchers now face the key question: Can China’s tech bulls maintain this momentum amid lingering economic and policy uncertainties?