Alibaba Group’s headline-grabbing rally tops off what’s been an incredible month for Chinese tech stocks.
In late January, the sudden arrival of made-in-China artificial intelligence app DeepSeek pulled the rug out from under Wall Street’s “Trump trade” party. The surge was driven by bets that US President Donald Trump’s policies would send US shares skyward.
Part of the excitement was Trump’s enthusiasm for AI, one shared with his benefactor Elon Musk. Trump punctuated the point on January 21, when he stood shoulder-to-shoulder with OpenAI’s Sam Altman, Oracle’s Larry Ellison and SoftBank’s Masayoshi Son at the White House to spotlight a US$500 billion Al infrastructure project.
Days later, it seemed like old hat as DeepSeek’s promise caught global markets off guard. Its cost-effective AI model using less advanced chips precipitated a nearly $600 billion selloff in Nvidia’s shares alone — history’s biggest corporate loss in market capitalization.
Now comes Alibaba bursting back onto the global scene with an ambition that’s also catching global investors off-guard. It includes a big push into Al, in which Alibaba is investing assertively.
The company that Jack Ma co-founded says it’s plowing more than $53 billion into data centers and other AI infrastructure projects. Apple, meanwhile, is incorporating Alibaba’s AI offerings in iPhones sold in China.
Yet Alibaba’s rally might have legs for an even bigger reason: Xi Jinping’s decision to, in the words of economist Stephen Jen, “make Chinese equities investible again,” starting with tech platforms.
Jen, CEO of Eurizon SLJ Asset Management, says that “in many ways, this is a call for a continued bounce-back in a long-depressed and unpopular market. For a change, though, there are now many more reasons to be positive than negative on Chinese equities and China in general.”
Of course, Alibaba’s surge hit a speedbump on Tuesday – along with Chinese tech stocks in general – after Trump called for greater scrutiny of foreign companies listed in the US.
But from Jen’s perspective, Chinese stocks will remain on roll for reasons including: regulatory easing; signs the property sector is finally bottoming to support better consumer sentiment; the resilience of Chinese bonds and the yuan; a chronic misjudging of China’s manufacturing and technological prowess; cheap valuations; and signs the world remains underweight Chinese assets.
Xi’s meeting with Ma and other mainland tech founders last week helped, too. Since late 2020, China’s tech scene has been in a state of corporate limbo following Xi’s crackdowns beginning with Ma’s fintech giant Ant Group.
Ostensibly, Ant’s planned $37 billion listing was scrapped after Ma criticized Beijing, suggesting policymakers don’t understand technology. In a speech in Shanghai, Ma accused regulators of stifling innovation and banks of having a “pawnshop mentality.”
First, Ant’s initial public offering was pulled. At the time, it would’ve been history’s biggest. Next, Xi’s financial regulator put under a microscope a who’s-who of tech giants: search engine Baidu, ride-hailing giant Didi Global, e-commerce platform JD.com, food-delivery Meituan and gaming colossus Tencent, among others.
Ma effectively entered into a period of political exile. That appeared to change last week when Xi invited Ma and other tech billionaires to an event heralding Chinese tech back on the ascendancy. Seeing Ma sitting in the front row, and Xi shaking his hand, had investors piling into mainland shares with enthusiasm not seen in years.
The scene suggested that “one of the world’s greatest living entrepreneurs” is “back into the good graces,” says analyst Bill Bishop, who writes the Sinocism newsletter. Bottom line, he says, “it’s an encouraging signal for private businesses.”
Daiwa analyst Patrick Pan notes that “from a long-term perspective, we turn more positive on the outlook for the China stock market.” China’s recent tech breakthroughs and pro-business pivot, he says, are “game changers for China stock prices.”
In March 2023, Alibaba unveiled the biggest restructuring in its 26-year history, splitting into six units and exploring fundraising or listings for most of them. At the time, Alibaba said the strategy is “designed to unlock shareholder value and foster market competitiveness.”
The six units included: domestic e-tailing, international e-commerce, cloud computing, local services, logistics and media and entertainment.
As then-Alibaba CEO Daniel Zhang put it two years ago: “The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready.”
The enterprise was bigger than Alibaba, though. It was a case study of sorts for China Inc as Xi’s regulators seek to head off risks and curb monopolistic tendencies among tech giants.
It’s quite a balancing act considering how Xi and Premier Li Qiang claim they want private companies to take the lead in creating jobs and boosting a troubled economy.
Ma’s Alibaba was an obvious place to start. It’s long been a global symbol of China’s tech aspirations and a weathervane of Beijing’s tolerance of tech billionaires spreading their wings.
Now, after years of uncertainty, says Daniel Ives, analyst at Wedbush Securities, Alibaba just “delivered an inflection point quarter,” led by a stronger-than-expected cloud business and an expanding AI push that could represent the “next gear of growth.”
As current Alibaba CEO Eddie Wu put it last week, AI is “the kind of opportunity for industry transformation that only comes around only once every few decades.”
Wu added that “when it comes to Alibaba’s AI strategy … we aim to continue to develop models that extend the boundaries of intelligence” and that AI could eventually “have significant influence on or even replace 50% of global GDP.”
When it comes to cheap Chinese valuations, Alibaba could be Exhibit A. While some profit-taking might happen, the company is still trading between 35% to 40% below past highs.
Yet pressure is on for Alibaba to take steps to validate investors’ bullishness.
“Fundamentals will have to be back in focus” to drive further gains in the stock, says HSBC Holdings analyst Charlene Liu. This includes Alibaba growing its e-commerce market share and demonstrating “a clear strategy to monetize AI and accelerate cloud revenue growth and margin improvement.”
The real onus, though, is on Team Xi to convince global investors broadly that China’s “uninvestable” days are over for good.
Over the last dozen years of Xi’s leadership, Beijing has too often slow-walked moves to strengthen capital markets, reduce opacity, scale back the role of state-owned enterprises, build a globally trusted credit rating system and increase regulatory certainty.
Clearly, the return of Hangzhou-based Alibaba to favor in Communist Party circles may be its own inflection point.
Recently, “Hangzhou’s innovation model has been lauded for fostering numerous superstar technology startups, dubbed the ‘Six Little Dragons’ in markets,” says Carlos Casanova, economist at Union Bancaire Privée.
This, Casanova says, “suggests China may be preparing to adopt a Hangzhou-style model that promotes both hard technology and high value-added software and services in its upcoming 15th Five-Year Plan, expected to be unveiled this October. Although we will not know for sure until the draft is released, it appears China is positioning for a strategic pivot in 2026.”
Yet convincing global funds that the multi-year tech inquisition is over will be easier said than done. Rhetoric and handshakes are fine, but ensuring that the regulatory chaos of the last few years are over is more important.
This “will take much more than optimistic pronouncements to restore confidence after months of undelivered promises,” says Jeremy Mark, senior fellow at the Atlantic Council. “This uncertainty does not sit well with the foreign institutional investors that Beijing has courted for years.
The volatility of recent months, though, “has given Chinese officialdom greater incentive to pursue a tightly regulated, less volatile stock market — one in which the likes of insurance companies, pension funds, and other government-run behemoths hold sway over individual investors,” Mark says.
The order of the day, Mark adds, “will be to encourage long-term investments in large companies by offering bigger dividends, share buybacks, and — ideally—steady profit growth.”
Of course, some think the attractiveness of mainland valuations trump concerns about market structure.
“Since January, the rally in the Chinese tech sector has been stunning, though the overall A-Shares market has not risen much,” says Jen of Eurizon SLJ.
“Not only are Chinese tech companies aggressively searching for ways to harness the power of rapidly advancing AI, but firms outside the tech sectors are trying to do the same. Chinese companies are generally very eager to adopt the best technologies, especially if they are cheap.”
Jen adds that “if the collective ‘IQ’ of Chinese manufacturing can keep up with the best in the world, Chinese equities ought to be in good standing, particularly when the ‘Magnificent Seven’ is so richly priced.” The seven companies mentioned here are Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla.
The argument isn’t always clear-cut. As mainland stocks surged last week, so did Nvidia’s.
By the start of this week, the California-based company had recovered roughly 90% of its market valuation losses. It’s a reminder that the AI boom is no particular nation’s to lose. And that translating wins by disruptors like DeepSeek into wider gains might collide with Beijing’s desire to maintain control.
“The stock could be volatile post results, but we expect positive momentum to resume as investors look forward to Nvidia’s leading new product pipeline and total addressable market expansion into robotics and quantum technologies at the upcoming [Nvidia] conference,” says Bank of America analyst Vivek Arya.
The macroeconomic backdrop matters, of course. The coming Trump trade war and the high odds they will boost inflation continue to cloud the global outlook.
“The upbeat mood seen among US businesses at the start of the year has evaporated, replaced with a darkening picture of heightened uncertainty, stalling business activity and rising prices,” says Chris Williamson, chief economist at S&P Global Market Intelligence.
Companies, Williamson says, “report widespread concerns about the impact of federal government policies, ranging from spending cuts to tariffs and geopolitical developments.” He concludes that the outlook for the rest of 2025 has swung to “one of the gloomiest since the pandemic.”
Even so, there’s growing optimism that Team Xi’s pivot to exporting to Global South nations and efforts to batten down the hatches leave China less vulnerable to Trump’s bullying than many thought.
At the same time, China Inc is proving it’s got some serious game on playing fields Trump World takes for granted – and not just AI. Chinese biotech companies are showing signs of developing drugs faster and cheaper than their US counterparts.
This includes cancer drugs at a moment when Trump is empowering Tesla billionaire Musk to take a wrecking ball to America’s scientific research institutions.
In the case of Alibaba, though, investors are hoping Beijing’s multi-year battle with Chinese tech is officially over. Validating this optimism will require Team Xi to ensure reforms are afoot so that last week’s big meeting internet platform is more than a photo op.
Follow William Pesek on X at @WilliamPesek
