Today, Alibaba's price movement in the Hong Kong market is primarily a recalibration following the three-day closure due to the Chinese New Year holidays. The surge in its Hong Kong shares reflects a catch-up effect with its ADR performance rather than an independent bullish trend.
Alibaba's recent stock rally is driven by multiple factors, with the launch of its new AI model Qwen2.5-Max playing a significant role. The company claims this model outperforms competitors like DeepSeek and Meta, boosting investor confidence. However, the sustainability of this rally is questionable due to several factors:
Cloud operations, while growing, still contribute a relatively small portion to Alibaba's overall earnings. Alibaba continue to compete with JD, Pinduoduo, ByteDance, and Tencent, with competition expected to intensify. Meanwhile, China's economy has not shown significant growth in domestic demand despite stimulus measures.
The depreciation of the Chinese Yuan against the USD potentially inflates costs and reduces the value of Yuan-based revenues when reported in USD.
The market's reaction to the AI model announcement may be creating a disconnect between short-term stock price movements and the company's long-term financial trajectory.
Funds are shifting to USD and U.S. bonds as a safe haven against Trump's tariffs.
Investors should approach this rally with caution and take profits.
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