The latest boost came on Thursday, when Alibaba’s stock jumped 8.4% after unveiling its QwQ-32B AI reasoning model—its strongest push yet into the AI space. The model, designed to be more efficient while competing with DeepSeek’s powerful R1, signaled Alibaba’s intent to take on the fast-rising AI startup that has disrupted the global tech landscape since January.
Market participants reacted swiftly, sending China’s tech sector into a rally on Thursday, with the Hang Seng Tech Index jumping 5.4%. Alibaba’s stock hit its highest level since late 2021.
Alibaba’s resurgence comes even as its market capitalization remains far below its peak. The company was once valued at $837.84 billion in October 2020 but has since tumbled, bottoming out at $203.66 billion in January, according to Companies Market Cap data. However, it has rebounded sharply in 2025, climbing to $344.31 billion as of March 7, mirroring a broader recovery in Chinese equities.
After years of sell-offs, Hong Kong’s Hang Seng Index has emerged as the world’s best-performing major stock market this year, rising 20% so far. On Thursday, it surged to its highest level since January 2022, driven by investor enthusiasm over AI and Beijing’s latest pledge to support emerging industries, including artificial intelligence, humanoid robots, and next-generation telecom.
There has been a stark turnaround for Chinese stocks as well, which ended a three-year losing streak in 2024. The CSI 300 Index, which tracks China’s biggest companies, gained 14.7% last year, while the Shanghai Composite rose 12.8%. Meanwhile, the Hang Seng ended 2024 with a 17.7% annual gain, its first positive year after four consecutive losses.Alibaba’s stock rally has been further supported by stronger-than-expected earnings. In February, the company reported an 8% revenue increase for the three months ending in December, beating forecasts with 280 billion yuan in sales. The news triggered a 14% surge in its shares, reinforcing investor confidence in the company’s post-crackdown recovery.Meanwhile, signs of a shift in Beijing’s stance on big tech have also boosted sentiment. At a rare meeting in February, President Xi Jinping hailed the private sector and called China’s economic challenges “surmountable”—a move widely seen as a signal that the government may be easing its grip on tech firms after years of regulatory pressure.
Adding to the intrigue, Alibaba co-founder Jack Ma, who had largely withdrawn from public view following the Ant Group IPO debacle in 2020, was present at the meeting. His inclusion has fueled speculation that Beijing’s approach to tech giants may be softening.
Meanwhile, DeepSeek’s emergence as a low-cost AI alternative to US tech giants has added another layer of momentum to China’s tech rally. Its open-source AI model, launched in January, shook up the industry, sparking investor enthusiasm for software-driven AI plays while denting sentiment for semiconductor stocks.
Alibaba’s response to the AI boom has been swift. The company has committed 380 billion yuan ($52 billion) over the next three years to AI infrastructure, a move that aligns with Beijing’s ambitions of cementing China’s status as a global AI leader.
However, the broader economic picture remains murky. China is still grappling with sluggish consumer demand and a struggling property sector, while US-China lingering trade tensions continue to cast uncertainty.
Still, with DeepSeek redefining the AI landscape, Alibaba’s renewed push into the sector, and an improving regulatory environment, the conditions for a sustained tech rally are falling into place.
The emergence of Alibaba, DeepSeek and other Chinese AI firms is reshaping investor sentiment worldwide. Last year, US semiconductor companies were the biggest beneficiaries of the AI boom, but in 2025, they’ll struggle amid concerns over shrinking margins and escalating US-China trade tensions.
The question now is: Can China’s tech bulls sustain this momentum, or will lingering economic and policy uncertainties keep investors on edge?
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