Why Alibaba Stock Spiked on Friday

Core Viewpoint - Alibaba's stock experienced significant volatility, driven by rumors regarding its potential investment in DeepSeek, a Chinese AI company, which the company later denied [1][3]. Group 1: Stock Performance - Alibaba's stock initially rose over 7% before retracting to a 4.1% increase during early trading on the NYSE [1]. - The fluctuations in Alibaba's stock price appear to be linked to speculation about DeepSeek's advancements in AI technology [2]. Group 2: DeepSeek and AI Developments - DeepSeek recently launched R1 and V3 large language models that reportedly outperform existing models from OpenAI, Anthropic, and Alphabet [2]. - In response to DeepSeek's success, Alibaba introduced its own AI product claiming superiority over DeepSeek's models and later began hosting DeepSeek on its cloud servers [3]. Group 3: Investment Rumors - Reports emerged that Alibaba was planning to invest $1 billion in DeepSeek, but these claims were denied by Alibaba, labeling them as "fake news" [3]. - The denial raises questions about the validity of the rumors and whether Alibaba has already made investments in DeepSeek [4]. Group 4: Valuation and Growth Potential - Despite the uncertainty surrounding DeepSeek, owning Alibaba stock may still be appealing, with a valuation of 20 times earnings and 16 times free cash flow [5]. - Long-term growth for Alibaba is projected at 18.5% annually, suggesting potential for future returns [5].