Alibaba’s New AI Shakes Up the Market, Sends Stock Soaring!

Alibaba unveiled its latest AI model, QwQ-32B, positioning it as a competitor to DeepSeek’s R1 and OpenAI’s technology. The model demonstrates strong reasoning capabilities, excelling in mathematics, coding, and problem-solving. Following the announcement, Alibaba’s Hong Kong shares surged 8.4%, while its U.S. ADRs gained 1.4% on Thursday. DeepSeek’s R1 had previously gained attention for its cost efficiency, though questions remain about its actual development costs.

Alibaba’s QwQ-32B features 32 billion parameters, significantly fewer than DeepSeek R1’s 671 billion, but is designed for high efficiency. DeepSeek also optimizes costs by activating only 37 billion parameters at a time. Alibaba’s AI advancements have fueled a 66% rise in its ADRs this year, with the company also providing AI technology for Apple’s iPhones in China. To further solidify its AI leadership, Alibaba announced a $52.4 billion investment in AI and cloud computing over the next three years. This move reinforces its commitment to becoming China’s leading AI developer. Despite a broader tech selloff, AI innovation continues to drive Alibaba’s stock growth.

Alibaba’s New AI Shakes Up the Market, Sends Stock Soaring!

Alibaba has unveiled a new AI reasoning model, QwQ-32B, which it claims outperforms competitors like OpenAI and DeepSeek. This announcement sparked an 8% surge in Alibaba’s Hong Kong-listed shares, contributing to gains in the Hang Seng China Enterprises Index. The company stated that the QwQ-32B model delivers exceptional performance, surpassing OpenAI’s o1-mini and rivaling DeepSeek’s R1, despite having significantly fewer parameters—32 billion compared to DeepSeek-R1’s 671 billion. Alibaba highlighted the model’s advanced capabilities in mathematics, coding, and general reasoning, making it more efficient to train and operate.

This development follows the launch of Manus, a general AI agent by Chinese company Monica, which can handle complex, multi-step tasks such as resume screening and website creation. Unlike traditional chatbots, Manus is designed to produce actionable results rather than just generating ideas.

Alibaba’s latest move comes amid growing competition in the AI sector. Earlier this year, DeepSeek gained attention with its R1 model, which offered high performance at a lower cost than Western alternatives, boosting investor confidence in Chinese tech innovation. Since then, the Hang Seng China Enterprises Index has risen over 30%.

Known for its e-commerce platforms Taobao and Tmall, Alibaba has been expanding its AI efforts since launching its ChatGPT-like model, Tongyi Qianwen, in 2023. In January, the company released Qwen 2.5 Max, which it claimed outperformed DeepSeek’s V3 model. Alibaba has also committed to investing at least 380 billion yuan ($52.4 billion) in AI and cloud computing over the next three years—exceeding its total investment in these areas over the past decade. This aligns with China’s broader strategy to support emerging industries, including AI, humanoid robots, and quantum technology.

Alibaba’s Hong Kong-listed shares reached a 52-week high, closing 8.39% higher on Thursday, while its U.S.-listed shares saw a slight decline. Year-to-date, Alibaba’s Hong Kong shares have surged nearly 71%. The company emphasized that the QwQ-32B model, despite its smaller size, is highly efficient, with 37 billion parameters actively used during inference—the process of analyzing live data to generate responses. This efficiency is increasingly important as developers aim to optimize performance while reducing resource consumption.

The race to develop advanced AI models has intensified, particularly after DeepSeek’s R1 made waves earlier this year. Alibaba’s cloud intelligence unit has played a key role in the company’s profit growth, with CEO Eddie Wu noting that AI-driven expansion in the cloud division will continue to accelerate. Analysts at Bernstein believe Alibaba’s AI advancements could drive significant stock gains and strengthen its earnings trajectory.

Futurum Group CEO Dan Newman commented on CNBC’s *Squawk Box Europe* that the rapid pace of AI innovation is reshaping the industry. The emergence of DeepSeek’s R1 challenged assumptions about OpenAI’s dominance and raised questions about whether major players like Microsoft, Google, and Amazon can maintain their lead. Newman also noted that large language models are becoming more commoditized, with developers focusing on reducing costs and improving accessibility. As AI models become more efficient and affordable, their adoption is expected to grow, shifting the industry’s focus from model training to real-world applications and inference.

Alibaba’s AI advancements have fueled a 66% rise in its American depositary receipts (ADRs) this year. The company also supplies AI technology for Apple’s iPhones in China and has reaffirmed its commitment to innovation with its massive investment plan in AI and cloud computing. This positions Alibaba as a leading AI developer in China and a strong competitor in the global AI race.