Alibaba’s $250 bn comeback rare China play giving investors growth and AI bragging rights

Alibaba Group Holding Ltd. has staged a stunning $250 billion comeback, transforming itself into China’s hottest artificial intelligence (AI) trade and luring back global investors who had largely shunned the country’s tech sector, according to reports.

The rebound, fuelled by Beijing’s push for technological self-reliance and Alibaba’s aggressive pivot into AI and cloud computing, is turning the e-commerce giant into a rare China story that offers both growth potential and AI bragging rights.

AI fuels investor FOMO

Alibaba’s US-listed shares have doubled this year, riding a wave of optimism that its $53 billion spending plan and fast-rising cloud revenues can anchor China’s position in the AI race. For global funds still underweight on Chinese equities, the surge has triggered a dose of FOMO.

“Alibaba is increasingly being seen as the only credible AI proxy in China,” one fund manager told Bloomberg, pointing to its dual advantage of scale and government alignment.

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The rally has made Alibaba the best-performing Chinese megacap in 2025. Yet the stock remains about 65% below its 2020 peak, highlighting both the scale of its past declines and the headroom investors see in the turnaround story.

Growth with AI bragging rights

Analysts say Alibaba’s edge lies in its ability to link its massive consumer-facing ecosystem with its cloud and AI businesses. The company has aggressively marketed its Tongyi Qianwen large language model and integrated AI services across e-commerce, logistics and finance.

Its cloud arm, which is key to Beijing’s ambitions of reducing dependence on US tech, has reported double-digit revenue growth and rising profitability, bolstering investor conviction.

“Valuations are still reasonable compared with US peers like Microsoft and Nvidia,” according to one Asia-based portfolio manager. “If you want both China exposure and an AI growth story, Alibaba is the only name that ticks those boxes right now.”

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Short bets creeping up

Not everyone is convinced the rebound has staying power. Short interest in Alibaba has risen in recent weeks, reflecting scepticism over how quickly its AI investments can deliver meaningful profits and whether Beijing’s broader regulatory and geopolitical risks will return to weigh on sentiment.

Some analysts caution that US rivals enjoy stronger ecosystems and more sophisticated AI applications, making it difficult for Alibaba to close the gap. “It’s going to be tough for them when you compare the depth of AI capabilities in U.S. companies,” one strategist told Finviz.

Why it stands out

Despite these risks, Alibaba’s rally highlights how rare it has become to find a Chinese company that excites global investors. Most peers are still weighed down by slowing domestic growth, regulatory uncertainty and weak consumer confidence.

Alibaba, by contrast, has managed to reposition itself as a growth and innovation play at a time when global funds are desperate for diversification beyond US tech giants.

“The broader China tech sector remains under-owned,” said an analyst quoted by ScanX. “But with Alibaba, you’re getting a credible AI story, exposure to China’s self-reliance push and valuations that leave room for upside. That combination is unique.”

The road ahead

Whether Alibaba can sustain its rally will depend on execution: turning its AI bets into sustainable revenue streams, maintaining momentum in cloud services and navigating geopolitical headwinds. Still, after years of investor flight from Chinese equities, the company has managed to restore confidence in its growth narrative.

For now, Alibaba’s $250 billion recovery highlighted a rare alignment between Beijing’s industrial policy and global investor appetite. In a world where most China trades are viewed with caution, Alibaba has become the outlier,  delivering both growth prospects and AI prestige.