Alibaba Group (BABA) shares made a big comeback on Wednesday, jumping as much as 6% even after the company reported weak fourth-quarter results earlier in the day. The stock initially fell about 2% in premarket trading after profits came in below expectations, but quickly rebounded as investors focused on Alibaba’s growing AI business and improving sentiment around China tech stocks.
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One major reason behind the rally was President Donald Trump’s visit to China for talks with Chinese President Xi Jinping.
Investors also reacted positively after Nvidia (NVDA) CEO Jensen Huang joined the U.S. delegation. Markets hope the meeting could help reduce tensions over AI chips and improve chip trade between the U.S. and China.
Any improvement in trade relations could help Chinese cloud and AI companies like Alibaba.
Cloud and AI Growth Stay Strong
Even though Alibaba missed earnings estimates, its cloud and AI business remained a bright spot. Cloud revenue rose 38% year-over-year to 41.63 billion yuan, while revenue from external customers jumped 40%. Alibaba also said AI-related products posted triple-digit growth for the 11th straight quarter.
CEO Eddie Wu said the company is now moving its AI business from development into larger-scale commercial use. Alibaba has also continued expanding its Qwen AI platform across Taobao and Tmall.
At the same time, the company reaffirmed its 380 billion yuan ($53 billion) AI spending plan through 2027 as it continues building cloud and AI infrastructure.
Investors Focus on Long-Term Growth
Heavy spending on AI, cloud expansion, and e-commerce discounts continued to pressure Alibaba’s profits in the near term.
Still, investors appear focused on the company’s long-term AI growth plans and improving cloud business. Alibaba also said it expects its quick commerce business to become profitable by fiscal 2027.
Is Alibaba Stock a Buy Now?
Wall Street remains constructive on the stock. Alibaba carries a Strong Buy consensus rating based on 15 Buy ratings and two Holds over the past three months. The average BABA price target stands at $186.32, suggesting roughly 30.35% upside from current levels.
