In the second week of July 2026, Hong Kong’s tech sector experienced a notable rebound, with Alibaba Group (09988.HK) emerging as one of the most closely watched stocks. On July 8 (Beijing time), Alibaba’s Hong Kong shares surged over 12% in a single day, marking the largest single-day gain since September 2, 2025. By the close of trading on July 10, Alibaba’s Hong Kong shares stood at HK$110.20, representing an approximate 18% gain from previous lows. During intraday trading on July 13, Alibaba continued its upward momentum, opening 0.5% higher at HK$110.8 and briefly touching HK$114.3.
This rally is far from an isolated event. Since hitting a more than one-year low of 22,518 points on June 26, the Hang Seng Index rebounded by as much as 1,836 points by early July. The Hang Seng Tech Index saw even more pronounced gains over the same period. Against this broader market recovery, Alibaba’s gains ranked among the highest of the major tech stocks—up approximately 27.35% since its June 26 low.
Market participants are now asking: Is this surge merely a short-term rebound driven by capital flows, or does it signal a structural shift in Alibaba’s valuation logic?
The Market Narrative Is Shifting
Over the past two years, Alibaba has been primarily labeled as an "e-commerce platform," a "consumer internet company," and a "local services competitor." Investors focused on metrics such as GMV growth, customer management revenue, and profit margin trends. Slowing e-commerce growth and increased investment in instant retail had, at times, weighed on Alibaba’s valuation expectations.
However, 2026 has brought a significant change. The framework for valuing Alibaba is shifting from that of an "e-commerce company" to an "AI infrastructure + cloud computing platform." The underlying logic for this transition is clear: the commercialization path for large AI models, cloud computing, and enterprise-level AI applications is becoming increasingly defined, and Alibaba has made substantial investments across all three areas.
At the model layer, in May 2026, Alibaba unveiled its next-generation flagship large model, Qwen3.7-Max, at the Yunfeng Summit in Hangzhou. This model is designed for intelligent agent workflows, complex reasoning, and high-intensity programming scenarios, featuring million-level context windows and long-duration autonomous execution capabilities. In global large model blind tests, Qwen3.7-Max ranked as the top Chinese model, outperforming Kimi-K2.6, DeepSeek-v4-pro, and GLM-5.1, and approaching the performance levels of leading models like GPT, Claude, and Gemini. As of July 2026, the Tongyi Qianwen series has open-sourced over 400 models, with cumulative global downloads exceeding 1.2 billion.
From an organizational perspective, on June 8, 2026, Alibaba announced a major organizational upgrade for its AI business: merging the Tongyi Large Model Division with the Future Life Lab to establish the Token Foundry Division, directly overseen by Group CEO Wu Yongming. This move sent a clear signal—AI has become a top strategic priority within Alibaba’s corporate structure.
In terms of commercialization, Alibaba Group CEO Wu Yongming stated in the 2026 fiscal year report: "Alibaba’s full-stack AI technology investment has officially moved beyond the initial incubation stage and entered a positive cycle of large-scale commercial returns." For the full fiscal year 2026, Alibaba Group’s revenue reached RMB 1,023.67 billion, up 3% year-over-year; excluding divested Sun Art Retail and Intime businesses, comparable revenue grew 11% year-over-year.
Alibaba Cloud: From Cost Center to Growth Engine
If there’s one core factor driving Alibaba’s latest rally, it’s almost certainly Alibaba Cloud.
In the fourth quarter of fiscal 2026 (ending March 31, 2026), Alibaba Cloud revenue reached RMB 41.63 billion, up 38% year-over-year. Notably, external commercial revenue growth accelerated to 40% year-over-year. Even more significant is the structural shift: AI-related product revenue reached RMB 8.97 billion, marking eleven consecutive quarters of triple-digit year-over-year growth. Annualized recurring revenue surpassed RMB 35.8 billion, with AI products accounting for over 30% of Alibaba Cloud’s external commercial revenue for the first time.
According to market forecasts, in the first quarter of fiscal 2027 (April–June 2026), Alibaba Cloud’s revenue growth rate is expected to reach 45% year-over-year, up about 7 percentage points from the previous quarter’s 38%—the fastest quarterly growth in nearly five years. Over the past five quarters, Alibaba Cloud’s revenue growth has climbed from 18% to 26%, 34%, 36%, and 38%, showing a clear upward trajectory.
In terms of market share, Gartner data shows that in 2025, Alibaba Cloud held a 32.8% share of China’s IaaS market, up 2.7 percentage points from the previous year, maintaining its top position. In the AI cloud segment, Omdia data indicates Alibaba Cloud held a 38% share of China’s AI cloud market in 2025, also ranking first. In the Asia-Pacific region, Alibaba Cloud’s IaaS market share rose from 20.8% in 2024 to 22.5% in 2025.
Alibaba Cloud’s MaaS (Model-as-a-Service) token revenue has also seen explosive growth. In the first five months of 2026, MaaS token revenue grew 15-fold, with monthly token revenue reaching several hundred million yuan. Alibaba expects annualized recurring revenue (ARR) from models and application services to hit RMB 30 billion by the end of 2026.
On the capital expenditure front, Alibaba announced in February 2025 that it would invest RMB 380 billion over the next three years to ramp up AI and cloud infrastructure. For fiscal 2026, total capital expenditure reached RMB 126.06 billion, up 46.63% year-over-year. This sustained investment is translating into accelerated revenue growth, creating a positive feedback loop that is reshaping how the market values Alibaba Cloud.
Hong Kong Tech Stocks: Undervalued AI Assets
Another backdrop to Alibaba’s rally is the global diffusion of the AI investment thesis.
From 2025 through the first half of 2026, global AI capital was heavily concentrated in US tech giants like Nvidia, Microsoft, Google, and Meta. But as valuations for these stocks continued to rise—Microsoft’s forward P/E around 33x, Amazon about 28x, Google about 23x—some investors began seeking alternatives with lower valuations but comparable AI infrastructure and commercialization capabilities.
Against this backdrop, Chinese tech stocks have entered the global investor spotlight. Hong Kong’s tech sector is trading at historically low valuations, yet leading companies generally possess strong AI R&D capabilities, robust cloud infrastructure, and vast user ecosystems. Alibaba exemplifies this dynamic.
As of July 10, 2026, Alibaba’s Hong Kong shares traded at a rolling P/E of about 17x, delivering a year-to-date return of approximately 22.74%. Compared to US AI giants, this represents a significant valuation discount. Some analysts believe that if Alibaba were valued at Google’s 25x P/E, its share price could have 40% to 50% upside. Goldman Sachs’ latest report maintains a "Buy" rating on Alibaba’s Hong Kong shares with a target price of HK$180. Citi projects that, driven by strong AI-related demand, Alibaba Cloud’s FY1Q27 revenue will grow 45% year-over-year to RMB 48.4 billion.
A recent Morgan Stanley report notes that capital rotation within the AI sector is shifting from chipmakers to hyperscale cloud providers. In this trend, Alibaba, as a comprehensive platform with both cloud infrastructure and AI model capabilities, could become a key allocation target for investors.
Can the Rally Last? Key Risks to Watch
The logic behind Alibaba’s recent rally is sound—accelerating AI commercialization, rising cloud revenue growth, and historically low valuations. However, all asset price movements come with uncertainty, and several risk factors warrant close attention.
Short-term pressure on profits from AI capital expenditures. In the fourth quarter of fiscal 2026, Alibaba’s adjusted EBITA fell 84% year-over-year to RMB 5.1 billion, mainly due to increased AI investments. The planned RMB 380 billion in AI infrastructure spending over the next three years means capital expenditures will remain elevated. It will take time for AI investments to translate into stable profits, so short-term pressure on overall earnings may persist.
Competitive landscape in e-commerce. While market attention has shifted to AI and cloud, e-commerce remains Alibaba’s largest revenue source. Competition in instant retail, investments in local services, and the pace of consumer recovery will continue to impact overall performance.
Macroeconomic environment and capital flows. The Hong Kong stock market’s overall trajectory is influenced by multiple macro factors, including geopolitics, currency fluctuations, and global capital allocation shifts. The Hong Kong dollar has recently hovered at the weak-side convertibility undertaking of 7.85, indicating uncertainty in external capital flows. Moreover, whether this rally includes short-term factors like quarterly fund rebalancing remains to be seen.
Pace of valuation recovery. While Alibaba’s current P/E of around 17x is lower than global peers, valuation recovery requires sustained performance. Whether cloud revenue growth can consistently exceed 40%, and whether AI-related revenue can reach management’s target of 50% within a year, will be key metrics for the market’s ongoing assessment.
Conclusion
Alibaba’s nearly 18% gain in Hong Kong over the past week is the result of multiple converging factors: AI commercialization entering a returns cycle, accelerating Alibaba Cloud revenue growth, valuation recovery across Hong Kong tech stocks, and global capital reallocating to undervalued AI assets.
Looking further ahead, the market’s valuation framework for Alibaba is undergoing a structural transformation. In the past, investors valued Alibaba as an e-commerce company; today, more are re-evaluating it through the lens of an "AI infrastructure + cloud computing platform." The sustainability of this shift will depend on Alibaba Cloud’s ability to maintain high growth, whether AI commercialization can deliver sustainable profits, and whether Alibaba can build a second growth curve beyond its e-commerce core.
For the broader market, Alibaba’s case may offer a wider perspective: as global AI investment shifts from hardware to application and cloud infrastructure layers, companies with a combination of technical prowess, infrastructure, and commercial use cases may be poised for a re-rating in valuation logic.
FAQ
Q: What are the main drivers behind Alibaba’s recent rally in Hong Kong?
The market’s valuation logic for Alibaba is shifting from "e-commerce company" to "AI infrastructure + cloud computing platform." Alibaba Cloud’s revenue growth continues to accelerate, AI-related product revenue accounted for over 30% for the first time, and the overall re-rating of Hong Kong tech stocks—coupled with global capital reallocating to undervalued AI assets—has jointly driven the share price higher.
Q: What role does Alibaba Cloud play in Alibaba’s overall business?
Alibaba Cloud is transitioning from a cost center to a growth engine. In Q4 FY2026, revenue reached RMB 41.63 billion, up 38% year-over-year, with external commercial revenue growth at 40%. Annualized AI-related product revenue surpassed RMB 35.8 billion, marking eleven consecutive quarters of triple-digit growth, and is now the main driver of cloud revenue growth.
Q: What specific progress has Alibaba made in its AI strategy?
In May 2026, Alibaba launched its flagship large model Qwen3.7-Max, which ranked as the top Chinese model in global blind tests; the Tongyi Qianwen series has open-sourced over 400 models with global downloads exceeding 1.2 billion; the Token Foundry Division was established under the direct oversight of the CEO; and MaaS token revenue grew 15-fold in five months.
Q: How is Alibaba currently valued?
As of July 10, 2026, Alibaba’s Hong Kong shares trade at a rolling P/E of about 17x, significantly lower than US AI giants (Microsoft around 33x, Amazon about 28x). Goldman Sachs maintains a "Buy" rating with a target price of HK$180; several institutions have recently issued "Buy" ratings with target prices ranging from HK$168 to HK$200.
Q: How sustainable is Alibaba’s share price rally?
Positive factors include accelerating AI commercialization, rising cloud revenue growth, and historically low valuations. However, risks such as short-term pressure on profits from AI capital expenditures, competition in e-commerce, and macro capital flow uncertainties remain. Sustained valuation recovery will require ongoing performance verification, with cloud revenue growth and AI revenue share as core metrics to watch.
