Prime Highlights

• Alibaba’s Hong Kong-listed shares surged over 19%, the biggest jump since March, driven by strong cloud and AI developments.
• The company is working on a new AI chip, signaling ambitions to compete with global tech leaders in AI infrastructure.

Key Facts

• Alibaba’s cloud unit revenue rose 26% year-on-year, with AI product sales recording triple-digit growth for the eighth straight quarter.
• The company posted 65 billion yuan ($34.73 billion) in revenue(up 2%) and a 78% jump in net income for the June quarter.

Background

Alibaba’s Hong Kong-listed shares soared more than 19% on Monday after the Chinese tech company reported strong growth in its cloud computing business and revealed progress in developing a new artificial intelligence (AI) chip. The jump marked the stock’s highest level since March, reflecting growing investor confidence in the company’s push into new technologies.

The rally extended gains from last week, when Alibaba’s New York-listed shares climbed nearly 13% following its June-quarter earnings. The company reported revenues of 247.65 billion yuan ($34.73 billion), up just 2% from last year and falling short of market expectations. Nevertheless, net income shot up 78 percent, outpacing forecasts, and lifting sentiments..

A major driver of optimism was Alibaba’s cloud computing unit, which recorded a 26% year-on-year revenue increase, its fastest growth rate in recent quarters. The company said demand for AI services played a key role, with AI-related product revenue maintaining triple-digit annual growth for the eighth consecutive quarter.

The reports that Alibaba is working on a new AI chip further motivated investors, as it indicates its desire to be on par with other world technology giants in powerful computing. Just like Microsoft and Google, Alibaba wants to make its cloud business a core part of its monetization of artificial intelligence.

At the same time, the company is strengthening its core e-commerce business while entering China’s highly competitive “instant commerce” sector. This year, its Taobao platform introduced one-hour delivery for select products, a move seen as crucial to retaining users. Although such investments have burdened adjusted earnings, investors seem to afford the firm the time to gain scale in the fast-growing quick commerce market.

With rising momentum in both cloud computing and e-commerce, Alibaba’s latest results suggest that the tech giant is regaining strength in China’s challenging market

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