Alibaba's AI Bet Fuels Rally as Investors Await Earnings Test

Investors are piling into bullish bets on Alibaba, looking past a recent multi-million dollar regulatory fine and focusing squarely on the company's aggressive artificial intelligence offensive. This strategic pivot is fueling a stock rebound and setting the stage for a critical earnings report in May.

The share price closed at 119.80 EUR, marking a solid weekly gain and a recovery from a steep sell-off in early April. That downturn was triggered by former US President Trump's threat of a 34% additional tariff on Chinese goods, which briefly sent the stock tumbling nearly 37%. While the stock remains about 26% below its 52-week high of 161.60 EUR and is down roughly 10% year-to-date, the recent momentum is undeniable.

A surge in call option activity underscores this renewed optimism. Trading volume for these bullish contracts recently jumped 44% above the daily average, indicating professional investors are positioning for further gains. Institutional players like Forteris Wealth Management have established new positions, and analyst sentiment remains strongly positive. Of 40 analysts covering the stock, 30 rate it a Buy or Outperform, with an average price target of $185.15—implying over 30% upside from current levels.

The core of this optimism is Alibaba's two-pronged AI strategy. The company recently launched "Happy Oyster," an AI model capable of simulating interactive 3D environments with physically accurate lighting in real-time, a direct challenge in the gaming sector. Simultaneously, it released the open-source model Qwen3.6, which costs just 38 US cents per million tokens. Its architecture activates only three billion parameters per computation step, allowing it to run efficiently on standard hardware. The broader Qwen model family now boasts over 300 million monthly active users.

This ambitious push requires massive investment. Capital expenditures soared 205% to 84.3 billion yuan in the 2025 fiscal year. Over three years, Alibaba plans to invest at least 380 billion yuan in AI and cloud infrastructure—more than it spent in the entire preceding decade. The company aims to grow external revenue from its Cloud Intelligence Group to approximately 690 billion yuan within five years, targeting an annual growth rate exceeding 40%.

Should investors sell immediately? Or is it worth buying Alibaba?

Such heavy spending comes with a short-term cost. The company's EBITDA margin is projected to fall from around 20% in fiscal 2025 to about 12% this year before rebounding to roughly 23% by 2030. However, early signs are promising. In the last reported quarter, cloud revenue from external customers grew 35%, with AI-related products notching triple-digit growth for the tenth consecutive quarter. The in-house chip unit, T-Head, had shipped about 470,000 chips by February 2026 and is approaching an annual revenue run rate of ten billion yuan.

A recent antitrust fine of nearly $528 million for deficiencies in its logistics business has done little to dampen spirits. Investors are instead focused on upcoming catalysts, including the market launch of the no-code platform "Meoo" and initial sales figures for new robotics hardware.

All eyes are now on the fiscal year 2026 earnings report, expected around May 14. This report will be a crucial test, revealing whether the cloud momentum is sustained and if management reaffirms its annual forecasts. Analysts at Bernstein reiterated a Buy rating on April 16, arguing the stock's discount due to trade tensions appears overdone. They note Alibaba's robust net liquidity position of $42.5 billion provides a solid buffer should geopolitical risks escalate. The coming weeks will determine if the AI offensive is already translating into bottom-line growth.

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