Alibaba stock (NYSE: BABA) has been on a tear since the start of 2025.

Late January saw the release of Chinese artificial intelligence (AI) model DeepSeek, which brought on a renewed wave of interest in the country’s tech stocks. Soon after, the e-commerce giant released Qwen 2.5, an updated version of its in-house AI model.

Two weeks later, the company announced that it would collaborate with Apple to bring AI features to Chinese iPhones — and it was reportedly considering an investment into DeepSeek.

Then, on February 20, the Jack Ma-founded company held its Q3 2024 earnings call. Both revenues and earnings came in above analyst estimates. The chief executive officer (CEO) stated that the company would invest more in AI and cloud computing in the next three years than it had for the entirety of the last decade.

On March 4, Alibaba stock closed at $131.30 — by press time, prices had increased to $143.66, bringing year-to-date (YTD) returns up to 68.44%.

Let’s take a closer look at what exactly has caused such a sudden move to the upside for BABA shares.

Alibaba stock surges following release of new AI model

March saw the Chinese e-commerce and tech giant announce the release of its newest AI offering. QwQ-32B, a medium-sized reasoning model, is reportedly meeting or surpassing the performance of DeepSeek’s most powerful model, R-1, according to benchmarks.

Moreover, the release is likely a sign of things to come. The Chinese AI industry, which had received little to no attention before DeepSeek’s thunderous debut, is engaged in a price war. To boot, the competition is fierce, as startups and established tech giants alike scramble to entrench themselves in what is a rapidly evolving space.

For Chinese companies, success in the sizable domestic market tends to produce a stable base from which international expansion can operate. You don’t have to look far to find an example — from Xiaomi to BYD, dominance at home enables global competitiveness on account of scale.

It’s impossible to predict, with any degree of accuracy, how any AI company will fare in six months, let alone in the long term. The impressive rally that Alibaba stock has been on is still a strong testament to market confidence. As impressive as the recent surge has been, readers should note that BABA stock is still roughly 50% off of its all-time high (ATH) price.

Alibaba also happens to be legendary investor Michael Burry’s biggest holding — and recently received a vote of confidence from Morgan Stanley. The investment bank is currently issuing a $180 price target for BABA shares, which implies a 25.29% upside from current prices.

Featured image via Shutterstock