Alibaba shares surge 19% as cloud growth and AI chip development fuel rally

Alibaba’s Hong Kong-listed shares surged more than 19% on Monday following strong quarterly results driven by its cloud computing division and reports of new AI chip development. The rally represents the stock’s highest level since March, as investors respond positively to the company’s accelerating cloud growth and strategic AI investments that position it to compete with tech giants like Microsoft and Google.

What you should know: Alibaba’s cloud computing unit delivered impressive growth that exceeded previous quarters and fueled investor confidence.

• Cloud revenue jumped 26% annually, marking an acceleration from the previous quarter’s growth rate.
• AI-related product revenue “maintained triple-digit year-over-year growth for the eighth consecutive quarter,” according to the company.
• The Monday surge built on Friday’s momentum when New York-listed shares closed nearly 13% higher following earnings.

Key financial details: The June quarter results showed mixed performance with revenue growth falling short of expectations but profits exceeding forecasts.

• Revenue reached 247.65 billion Chinese yuan ($34.73 billion), representing a 2% year-over-year increase that missed analyst expectations.
• Net income surged 78% annually, beating forecasts and providing a positive surprise for investors.
• Investments in instant commerce weighed on adjusted earnings for the e-commerce business, though investors are giving the company leeway to invest for growth.

The AI chip development: CNBC reported that Alibaba is developing a new AI chip, which contributed to Monday’s share price rally.

• The company has been investing heavily in AI infrastructure and developing its own models, similar to Chinese and U.S. tech rivals.
• Alibaba sells AI services through its cloud computing unit, with investors viewing this division as key to monetizing artificial intelligence.

Broader business momentum: Beyond cloud computing, Alibaba’s core e-commerce operations are showing signs of revival amid aggressive expansion into new markets.

• The company launched instant commerce features on Taobao, one of its main Chinese e-commerce apps, providing deliveries within an hour for certain products.
• This move puts Alibaba in direct competition with China’s cut-throat instant commerce market, requiring significant investment but offering substantial growth potential.