Alibaba - New Growth Engines from AI Breakthrough

Alibaba has again proven that it is not just a pure e-commerce platform. 

The company has achieved breakthroughs in the technology space, this time with its artificial intelligence (AI) achievements, and is making a strong comeback to the tech world.

AI has been largely a Western story for the past 3 years, with Nvidia, OpenAI, and Google mainly being the investors’ focus as companies are racing to spend billions of dollars to develop the most sophisticated AI models in order to dominate the AI space. 

The Chinese companies, however, are not resting on their laurels, with DeepSeek taking the world by surprise by unveiling their low-cost AI model in Jan 2025. 

Alibaba also introduced their AI model, Qwen 2.5 Max, and benchmark tests have shown Alibaba is now a leading contender in the AI race, leapfrogging their US peers and even DeepSeek.

Breakthrough in AI: Qwen 2.5 Max

Advanced Reasoning Ability And Accuracy: Qwen 2.5 Max has achieved 89.4% accuracy on Arena-Hard tests and 60.1% on MATH tests, higher than both ChatGPT and DeepSeek’s models. This suggests that Qwen will be able to compute more complex equations than ChatGPT and DeepSeek.

High Token Capacity: Qwen also emerges ahead in their token capacity with 128k, compared to ChatGPT’s 256k and DeepSeek’s 200k. This test measures the ability to read and process long and complex documents without losing context and accuracy. 

Cheaper: Besides being more efficient and accurate, Qwen has also proven that it is a low-cost AI model, about 10 times cheaper than ChatGPT. Companies can now use the Qwen model to develop AI apps at a much cheaper price than if they have used ChatGPT. 

Overall, Alibaba’s Qwen has provided a low-cost AI model that is cheaper than ChatGPT and more accurate than both ChatGPT and DeepSeek.

Strategic Partnership with Apple in China

Alibaba’s Qwen capability and credibility have been further endorsed by Apple, who announced that they would adopt Qwen for iPhones in China. 

This partnership brings together two tech giants who have been facing immense competition in China from their peers in recent years. 

This partnership can potentially be a game changer for both companies, with the possibility of triggering Chinese consumers to purchase iPhones to access more AI functionalities and benefit both Apple’s iPhone sales and Alibaba’s cloud services.

To highlight Apple’s current severe situation in China, iPhone sales revenue has declined 18% in Q4 2024, losing out to domestic brands such as Huawei and Vivo.

China Smartphone Sales Market Share, Q4 2023 vs Q4 2024

Cloud Computing may gain market share

With Qwen now emerging as the top-performing AI model, it could help both Apple and Alibaba regain market share in China, which is a concern for many investors.

E-Commerce Recovery

As we shared earlier, Alibaba's Tmall and Taobao have been seeing their market share eroded in recent years by peers such as Pinduoduo and Douyin. 

This is still early days if Qwen could be the key to Tmall and Taobao to arrest their declining market share in China. 

AI-powered functions to help brands optimise their advertising spend could be one of the many ways to help Alibaba grow its E-commerce platform business again.

Valuation

Alibaba’s shares have regained investors’ attention since the beginning of 2025, with the share price up strongly 56% in a short period of 2 months. 

This came at the back of investors focusing on Chinese tech companies as recent AI developments suggest Chinese tech companies are developing AI capabilities as well as (if not better and faster than) their US peers. 

Despite the strong year-to-date share price performance, Alibaba still trades at a forward price-to-earning of 12.9x, which is lower than global e-commerce and AI peers. 

You can now trade Alibaba through Hong Kong Singapore Depository Receipts (SDRs).

These HK SDRs offer investors a more accessible way to invest in five Hong Kong-listed companies, including Tencent.

In particular, Alibaba can now be purchased with a lower minimum outlay through SDRs. These SDRs will also be custodised in your CDP account. 

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