Alibaba's AI Breakthrough With QwQ-32B Boosts Chinese Tech Stocks And Market Sentiment

Alibaba Group Holding unveiled its new open-source AI reasoning model, QwQ-32B, on Thursday, driving its shares up over 8% in Hong Kong -- their biggest intraday gain in nearly two weeks.

Alibaba's AI breakthrough

The launch of QwQ-32B, which Alibaba claimed outperformed DeepSeek's R1, showcased the company's AI abilities in both models and data center infrastructure.

The rise in share prices also helped boost the Chinese tech stocks' index by about 5%, putting it on track for its strongest close since 2021, Bloomberg reported.

Focus Technology, a company in mainland China that offered AI-driven solutions, hit the daily 10% increase limit. Meanwhile, other AI-related stocks, such as software company Client Service International, also saw major gains, South China Morning reported.

Earlier this year, DeepSeek's AI breakthrough had also sparked a strong rally in Chinese stocks.

Alibaba expands AI ambitions with new model

Alibaba's new AI model is designed to compete with DeepSeek's R1 and OpenAI's o1. With 32 billion parameters, the new AI model is designed for the efficiency required to meet the rising demand for AI models that require less data and computing power.

Parameters are components of an AI model that are learned from training data, allowing the model to make more accurate predictions or meaningful outputs.

Alibaba has committed to investing over 380 billion yuan ($52 billion) in AI infrastructure, including data centers, over the next three years, reflecting the company's goal of becoming a leader in artificial intelligence.

Fueling market optimism

China's announcement at the National People's Congress this week regarding its support of the extensive application of large-scale AI models and development of new-generation smart devices also saw the tech sector experience a surge in investor confidence.

Managing director at Union Bancaire Privee Vey-Sern Ling said, "There's quite a few positive drivers for Alibaba with their open-source reasoning model the latest catalyst. Their core business is improving and clearly will benefit from China's push to drive consumption," Bloomberg reported.

Vey-Sern added, "Investors now also recognize the value that AI will bring to their cloud computing business."

Ken Wong, an Asian equity portfolio specialist at Eastspring Investments, noted that the market was reevaluating, as many Chinese tech stocks appear undervalued compared to their U.S. counterparts.

Investor enthusiasm was evident, with even hardware tech companies that previously struggled now experiencing growth, Wong explained.