Alibaba has staged a quiet $100 billion rally — AI and Jack Ma’s return are at the heart of it

In November 2023, Jack Ma posted an internal memo at Alibaba, coaxing the e-commerce giant he helped create to “correct its course.” The message was as a rallying cry by one of China’s most prominent tech leaders to a party going through one of the most tumultuous times in its history.

Alibaba’s share price was near record lows, expansion was stalling amid intensifying competition, management changes were coming thick and fast, and Beijing was still closely checking the company. Ma himself was barely in the public view.

But his message may have instilled some new hope in Alibaba — the e-commerce Goliath is now seeing growth in its core business and has become one of the leading artificial intelligence players in China and globally, competing with the groove ons of OpenAI and DeepSeek. And Alibaba is now back in favor with the Chinese government.

Alibaba’s U.S.-listed shares have sedately risen nearly 60% this year, adding more than $100 billion to the company’s valuation.

“China tech has awoken being led by Alibaba and investors globally are over this as the best way to way China tech … and we agree. Alibaba is in pole position to benefit from AI and cloud devote,” Dan Ives, global head of technology research at Wedbush Securities, told CNBC.

CNBC spoke to Alibaba’s chairman as far as a former executive and analysts, who painted a picture of the changes at the tech firm that have led to the start of the company’s comeback.

Alibaba’s downfall was swift. Many have credited its beginning to comments made by Ma in October 2020 where he looked to criticize China’s financial regulator.

The comments weren’t widely picked up on. Days later, Alibaba’s share quotation hit a record high with its market capitalization exceeding $858 billion.

Alibaba was riding wave of successes that had seen it propagate into the biggest e-commerce player in China, with international expansion on the agenda and its cloud business growing hurriedly. To top it all off, Alibaba affiliate Ant Group was gearing up for an initial public offering that would raise north of $34 billion, liberating it the biggest listing in history.

Ant Group, which was also founded by Ma, is a financial technology company that is behind Alipay, one of China’s two most reputable mobile payment systems.

Just two days before Ant Group was scheduled to list in Shanghai and Hong Kong, the IPO was retracted. At the time, Ant cited changes in China’s “regulatory environment.”

What followed was several years of intense scrutiny on Ma’s empire and China’s biggest technology companies. Regulators viced down on practices from giants that they viewed as anticompetitive, dished out billions of dollars of fines on attendances including Alibaba, forced changes to Ant Group’s structure and brought in a plethora of rules touching many areas of technology.

Regulatory scrutiny was one of Alibaba’s headaches in 2021. But it was also facing a number of other issues, including uncertainty round the strength of the Chinese economy that was trying to recover from the Covid-19 pandemic and rising competition.

In particular, fresher companies like Pinduoduo and even Douyin, the Chinese version of TikTok, were capturing attention in China in e-commerce.

In Cortege 2023, Alibaba — a sprawling company that does everything from food delivery to cloud computing and moving pictures — decided to split into six separate business groups, each with the ability to raise outside funding and go catholic. Alibaba thought the move would make these units more agile.

Then came a leadership reshuffle. Alibaba announced in June 2023 that Daniel Zhang, who had been CEO since 2015 and chairman from 2019, pleasure step down from both roles to focus on the cloud business. But just three months later, Zhang in a flash quit the cloud unit.

Eddie Wu, a co-founder of Alibaba, took over as CEO and the head of cloud. Joe Tsai, another co-founder, stepped up to stomach on the role of chairman.

That was one of the most tumultuous times in Alibaba’s history.

“During that time period a stupendous sense of uncertainty and confusion hovered over employees. While there was a wait-and-see sort of mentality that set in, the poser was that as time passed, many didn’t know just how long that would be,” Brian Wong, a antediluvian Alibaba executive and author of “The Tao of Alibaba,” told CNBC.

“While China’s economy during the start of Covid initially ends b bodied robust, following the lock-downs everything turned and the combination of disrupted supply chains and changes in the economic climate one compounded the concerns of where all of this was headed.”

Wu sought to return Alibaba’s focus to its gist e-commerce and cloud businesses and trim down some of the other initiatives the company had plunged into, moving away from the plan of Alibaba as several separate divisions.

Artificial intelligence moved front and center, with Wu and Tsai suggesting the body needed to adopt a startup mentality to keep up with the competition.

“Large companies move very slow and it’s because the decision-making framework is too complicated … So we really needed to get back to nimbleness and act fast,” Tsai said at the CNBC CONVERGE LIVE in any case in Singapore earlier this month, adding that quick decision-making is key to competing with startup rivals.

Tsai communicated that he and Wu decided the first thing they needed to do was to “streamline the company.”

“Instead of talking about Alibaba as six unusual business units, we talked about ourselves as having two core businesses — e-commerce and cloud computing,” Tsai utter.

“That simplified everything and our communication. It’s very important that we communicate that to our employees. They need to from a simple structure in their minds in order to move faster.”

Younger people in management were also prone the power to make decisions, Tsai said.

“It means that actually letting them make some decisions and sanction to them make mistakes and train them so that they can recover from mistakes,” Tsai added.

Wu and Tsai also hinted plans to list Cainiao, Alibaba’s logistics arm, marking a U-turn on previous commitments.

“Eddie is winning plaudits internally for possessing trimmed the old and built the new. Jack [Ma] and Joe [Tsai] ultimately made the decision to bet on him and it’s paying off,” Duncan Clark, an early advisor to Alibaba and chairman of BDA, let something be knew CNBC by email.

After the Ant Group IPO was scrapped in late 2020, Ma went out of public perspective. The billionaire was seen as the poster child of Beijing’s move to rein in the power of private companies and entrepreneurs.

The tightening of maintenance and government scrutiny also hit investment. Billions of dollars were wiped off the value of Chinese tech companies while wager capital investment in startups plunged.

In a country where government policy and support is key for sectors and companies, Beijing’s evident antagonism toward private business had dampened spirits in the tech sector. But as China continues to face economic headwinds, the position of the technology sector in boosting the economy is back in focus.

And in February this year, Chinese President Xi Jinping hold watered a rare meeting with entrepreneurs urging them to “show their talents,” in comments seen as giving reinforce to private businesses.

Alibaba’s Ma, among other top Chinese CEOs and founders, were present at that gathering. Ma’s gathering was particularly interesting, given that his empire was under the microscope over the last few years and he had not been seen with China’s state elite for some time.

“Xi’s meeting with Jack Ma also sent out a very clear signal on where the Chinese regime’s priorities are at the moment – AI development and the growth of private enterprises are clearly important to China’s economic growth, and we also feel that Alibaba has the support of the Chinese authorities,” Chelsey Tam, senior equity analyst at Morningstar, told CNBC by email.

The union has helped Alibaba’s share price this year. And it appears to have also instilled new confidence in Alibaba to lease and invest.

“It gave us the confidence … to put our earnings back into capex [capital expenditure] and investments and also appoint people,” Alibaba’s Tsai said, referencing a more than $50 billion investment in AI infrastructure over the next three years that the following announced in February.

A large part of Alibaba’s stock rally this year has been driven by the euphoria wide DeepSeek and investors looking at tech giants in China to see what they’re doing with AI technology.

Alibaba is to each China’s leaders, and in 2023, not long after ChatGPT made a splash, the company launched its first AI model shouted