On February 25, Alibaba made a significant stride in the artificial intelligence landscape by launching the QwQ-Max-Preview modelThis innovative model is built on the foundation of the AI model Qwen2.5-Max, indicating a deeper dive into advanced reasoning capabilitiesAs a preview version, it hints at exciting developments to come, with the official release expected shortlyTo streamline users' access to this cutting-edge technology, Alibaba also introduced the qwen.ai domain, allowing for straightforward login and user engagement.

The company has announced that both Qwen2.5-Max and the new QwQ-Max reasoning model will be open-sourcedThis initiative is poised to empower developers and organizations with enhanced reasoning capabilities across various applications, including code generation, multimodal processing, and tackling complex tasksThe beauty of this move lies in its democratization of AI technology, fostering innovation and experimentation across industries.

Moreover, Alibaba's open-source strategy goes beyond merely offering extensive models; it includes lighter versions such as QwQ-32B, which can be seamlessly deployed on local devicesThis flexibility addresses the diverse needs of developers and businesses looking for tailored AI solutions without being overly reliant on cloud infrastructure.

During a conference call for the third fiscal quarter of 2025 on February 20, Alibaba CEO Wu Yongming emphasized the importance of these reasoning models, noting that as of the end of January, the various derivatives of their AI model surpassed 90,000 globally, securing a leading position among competitors in prominent organizations.

Wu further elaborated, "In the next three years, Alibaba will significantly increase its investments around the AI strategic core, focusing on AI infrastructure, foundational model platforms, AI-native applications, and transforming existing businesses with AI." This commitment underscores the company’s long-term vision to lead in AI technology advancements.

Just four days later, in a bold declaration, Alibaba announced an investment of over 380 billion yuan to build cloud and AI hardware infrastructures over the next three years

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This ambitious move represents a cumulative sum greater than the last decade's investments in this field.

Wu described the AI revolution as a once-in-a-generation opportunity for industry transformationHe suggested that the AI phenomenon is unfolding at a pace that far exceeds earlier predictionsWith China's tech sector still blossoming, the prospects seem promisingThus, Alibaba is resolutely committed to accelerating the development of cloud computing and AI hardware.

The strategic goal of Alibaba within its AI framework aims directly at achieving AGI (Artificial General Intelligence)—a monumental leap that could far surpass any current application scenarios we're accustomed to.

The financial results for Q3 of fiscal year 2025 reveal a significant rebound for Alibaba Cloud, with external commercial revenue returning to double-digit growth, reaching 31.742 billion yuan, marking a year-over-year increase of 13%. Notably, revenues from AI-related products under Alibaba Cloud witnessed triple-digit year-over-year growth for six consecutive quarters, highlighting the booming interest and adoption of AI solutions across its customer base.

Reflecting on the previous year, Wu stressed that revitalizing growth for Alibaba's core e-commerce and cloud computing sectors stood as the highest priorityThis focus certainly paid off, as indicated by the nearly doubling of the revenue growth rate to 13% compared to a prior quarter’s 7%. Morgan Stanley characterized the company's market performance as "undervalued," further drawing attention to the positive trajectory within the context of AI's growing influence.

Amidst a global tech arms race for AI infrastructure, industry giants are stepping up their investments

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For instance, Amazon is projected to spend over 100 billion USD on AI infrastructure by 2025, and Microsoft has earmarked 80 billion USD for its AI data centers during the same fiscal timelineDomestically, companies such as ByteDance and Tencent are similarly investing substantial amounts exceeding 100 billion yuan.

Alibaba's planned 380 billion yuan investment sets a new benchmark for private enterprises in China’s cloud and AI hardware infrastructure sectorAnalysts at Morgan Stanley project that this capital expenditure will significantly bolster Alibaba's competitive edge in the cloud computing market, forecasting that its cloud revenues may double within three years.

In mid-February, Alibaba Group's chairman, Cai Chongxin, confirmed that Apple had chosen to collaborate with Alibaba, integrating the Tongyi Qianwen large model as a means to provide AI services for iPhones in ChinaThis partnership not only boosts Apple’s capabilities in the Chinese market but also expands Tongyi Qianwen's user base through Apple’s vast ecosystem.

According to Counterpoint Research, this collaboration allows Apple to leverage the API of the Tongyi Qianwen series of models, optimizing its services for the Chinese contextFurthermore, Alibaba stands to benefit from this alliance as it could significantly increase the number of users engaging with Tongyi Qianwen, leveraging the presence of 250 million active Apple devices in the region.

Moreover, Alibaba Cloud is positioned to act as a cloud service provider to Apple, offering customized cloud and AI infrastructure solutions

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This partnership with Apple is anticipated to attract more enterprise customers, thereby further strengthening Alibaba Cloud's competitive positioning in the global cloud computing market.

Since the beginning of 2025, Alibaba's stock price on the Hong Kong stock exchange has surged by nearly 70%, reaching a three-year high, with peaks hitting 140.9 HKD per shareAnalysts suggest this upward trend is largely attributed to the burgeoning interest and investment surrounding AI technologies.

In the aftermath of Alibaba's Q3 financial report on February 20, analysts focused predominantly on developments in AI, with no inquiries regarding the company's core e-commerce sector.

Ding Zhechuan, the chief analyst of the commercial internet sector at China Merchants Securities, noted in an interview that not only the technology segment but also robust performance in e-commerce significantly contributes to improving the valuation of Alibaba.

In its core e-commerce segment, Taotian Group—representing domestic retail—achieved Q3 revenues of 136.091 billion yuan, a 5% increase year-over-year, with the previous quarter barely registering a 1% gainOf particular interest is the customer management revenue (CMR) metric, which exceeded a billion yuan for the first time in Q3, marking a 9% increase from last year.

The competitive landscape has intensified due to the influence of platforms like Pinduoduo and Douyin

Ding pointed out that improvements in the monetization rate of Alibaba's e-commerce core have enhanced certainty in performance, further supported by overall business fundamental improvements, leading to a reassessment of e-commerce valuations.

Moreover, the Q3 financial results forecast that Alibaba International Digital Commerce Group (AIDC) will achieve its first profitable quarter in the upcoming fiscal yearJiang Fan, who previously served as president of AIDC, has transitioned to become CEO of Alibaba's e-commerce group, unifying the management of both domestic and international e-commerce operations.

Three months into his new role, Jiang publicly stated during the Q3 financial call that the path to profitability for international ventures is clear, although it remains uncertain whether the profits would surpass those of domestic operations.

Since taking charge of overseas e-commerce in 2020, Jiang has played a vital role in transforming international e-commerce into one of Alibaba's fastest-growing sectors, with an impressive year-over-year growth of 32% noted in the latest Q3 financial results.

In contrast, Taotian Group is undergoing significant growth pressure, during which both Alibaba founder Jack Ma and Wu Yongming, the new CEO of Taotian Group, emphasized a return to the basics of the platform—focusing on the user experience and embracing the internet ethosWu has been quoted stating “user first” as a guiding operational philosophy.

Immediately following the Lunar New Year holiday, Jiang identified "growth" as the strategic priority for 2025 within the Alibaba e-commerce group

He emphasized the successful integration of additional payment channels into Taobao, uncovering vast potential for user growth within China’s e-commerce landscape and highlighting the need for ongoing investments focused on engaging users.

Ultimately, Alibaba’s reevaluation and substantial investment in cloud and AI-related businesses compliment a broader strategy of refocusing on the user experience in its core e-commerce venturesAligning new technological opportunities with its strategic business priorities, the company remains focused on both domestic and international e-commerce operations alongside its technology initiatives.

As Wu suggests, "Upgrading AI technology will create enormous opportunities for enhancing user value," leading Alibaba to pursue leveraging AI extensively to transform and enhance their e-commerce and various internet platform operationsBy the end of 2024, Alibaba plans to pivot its Tongyi App team from Ali Cloud to Alibaba's intelligent information division, advancing a dual strategy emphasizing both B2B and B2C.

An insider from Alibaba’s intelligent information division revealed that the Tongyi App team will collaborate with existing AI products such as Quark and Tmall Genie for innovative applications and explore consumer markets effectivelyAdditionally, four innovative lines of business under the division, including Quark, Idle Fish, Ding Talk, and 1688, will collaborate more closely with the Tongyi Qianwen large model to implement AI transformations and upgrades.

Further announcing internal pushes to enhance user experience through AI, Alibaba management indicated that applications like Amap would also be imbued with AI-driven improvements, substantially enhancing user engagement.

Wu opined that Amap, with over 170 million active users, has the potential through AI applications to become an entry point for various everyday services, further embedding Alibaba into users' daily lives.

In the face of ongoing transformations and organizational adjustments, Alibaba has sharpened its focus on core business areas while actively disengaging from non-core assets and investments.

Alibaba CFO Xu Hong noted the company's strategic exits from conglomerates such as RT-Mart and Intime Retail

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