Why Alibaba Stock Gained 16.6% Last Month

Core Insights - Alibaba Group's shares increased by 16.6% in January 2025, influenced by the introduction of a new AI system called DeepSeek, which negatively impacted Nvidia's shares by nearly 11% last month [1][2] Group 1: AI Strategy and Developments - Alibaba does not own DeepSeek; it is operated by a software company of the same name, backed by a Chinese hedge fund [2] - Alibaba has its own large language model (LLM) named Qwen and quickly integrated DeepSeek services into its cloud platform, allowing clients to train their own LLMs with proprietary data [3] - The company released an upgraded version of Qwen, named Qwen2.5, coinciding with the launch of DeepSeek, which was unexpected as it occurred on the first day of the Lunar New Year [3][4] Group 2: Market Position and Future Outlook - Alibaba is actively utilizing and reselling DeepSeek technology while enhancing its in-house AI solutions, demonstrating agility in the competitive tech landscape [4][5] - The upcoming fourth-quarter earnings report is anticipated to provide insights into Alibaba's response to DeepSeek and its overall AI strategy [6] - Alibaba is currently trading at a valuation of 20.6 times earnings and 15.8 times free cash flows, which is considered affordable compared to other AI-focused companies like Nvidia and retail giants like Amazon [7] - The company's future performance is expected to be closely tied to the effectiveness of its AI strategy [8]