Alibaba Group reported a 5% year-on-year increase in overall revenue for the July-September quarter, reaching 247.8 billion yuan ($35 billion). However, the Chinese tech giant's profit experienced a significant 52% fall from the previous year. This decline in profitability is attributed to a fierce price war prevalent in China's e-commerce landscape, which also impacted the food delivery segment. Alibaba's e-commerce rival, JD.com, similarly reported a substantial 55% net profit drop during the same quarter.

Despite the challenges in its traditional e-commerce sector, Alibaba's cloud business demonstrated robust growth, with revenue surging by 34% in the most recent quarter. This growth rate surpassed the 26% increase recorded in the April-June quarter and was significantly buoyed by the burgeoning demand in artificial intelligence (AI). Alibaba, which initially focused on e-commerce, has strategically shifted its attention towards cloud and AI technologies. Earlier this year, the company committed to investing at least 380 billion yuan ($53 billion) over three years to advance its cloud computing and AI infrastructure. CEO Eddie Wu emphasized that the group's "significant" investments in AI have been instrumental in its revenue growth.

The company noted an "accelerating" demand for AI and expressed "strong conviction in future AI demand growth." Alibaba indicated that it might even exceed its planned 380 billion yuan investment in AI to meet this surging market demand. Reinforcing its commitment to AI, Alibaba announced on Monday that its upgraded AI chatbot, Qwen, designed to compete with OpenAI’s ChatGPT, achieved an impressive 10 million downloads within the first week of its public launch.

Investor optimism surrounding Alibaba's progress in AI has been reflected in its stock performance. The company's Hong Kong shares gained 2% on Tuesday, and its shares on the New York Stock Exchange rose 2.4% just before the opening bell. Overall, Alibaba's shares have climbed more than 90% year-to-date. The broader Chinese AI sector has seen significant developments, with tech startup DeepSeek challenging the perceived dominance of U.S. rivals. While Alibaba and Tencent, another major Chinese tech firm, have shown strong AI performance (Tencent reported a 15% year-on-year revenue gain in the July-September quarter), Baidu, also an AI competitor, recorded a 7% drop in revenue during the same period. Meanwhile, growing concerns among investors and analysts regarding a potential "overblown AI bubble" were somewhat alleviated by Nvidia's strong earnings report last week.