Shares of Alibaba Group Holding Ltd. (NYSE: BABA) surged 11.34% to $109.27 in U.S. premarket trading Wednesday, notching one of its sharpest single-day rallies in recent months. The advance comes as Cathie Wood’s Ark Invest has nearly liquidated its full position in the e-commerce and AI conglomerate over the past two months, underscoring a widening rift between bulls and bears over the stock’s outlook.
The rally was kicked off by an improved business outlook. Alibaba recently briefed analysts on its second-quarter operations, noting that losses in its instant-commerce segment have narrowed significantly while overall group profitability remains stable. The upbeat signals first lifted Alibaba’s Hong Kong-listed shares, which climbed as much as 12.5% intraday and helped drive the Hang Seng Tech Index roughly 5% higher.
Wall Street analysts have backed the more constructive tone. Thomas Chong at Jefferies said the stock’s more than 33% year-to-date decline has already priced in most of the market’s pessimism. He expects solid operational execution from Alibaba in the June quarter, with its AliCloud division set to deliver faster year-over-year growth on the back of rising demand for AI services.
Sentiment got an additional boost from two concurrent developments. First, Alibaba has told employees to discontinue use of Anthropic’s AI products starting July 10, classifying the software as high-risk and directing staff to switch to its proprietary coding assistant Qoder. The move follows prior allegations from Anthropic that Alibaba attempted to distill its AI capabilities.
Separately, a U.S. federal court has temporarily blocked the Defense Department from enforcing a lobbying ban that designates Alibaba as a “Chinese military-linked company.” The restriction will be paused while the case is under review, offering a marginal easing of geopolitical pressure that has weighed on the stock.
The sharp rebound stands in stark contrast to Ark Invest’s steady pullback from Alibaba since mid-May. Wood’s firm has sold off almost all of its BABA holdings, including a $54 million single-day disposal in late June. Wood has not publicly commented on the exit.
Ark’s retreat came against a backdrop of dual pressure on Alibaba’s fundamentals and operating environment. The company reported a net loss of 848 million yuan ($123 million) for the first quarter in its May earnings release, swinging from a 28.4 billion yuan profit in the year-ago period. Free cash flow also tumbled to negative $2.5 billion, down from $544 million 12 months prior, as Alibaba ramps up heavy capital spending to compete in the AI sector. Beyond financials, U.S.-China frictions over AI regulation and the Pentagon’s military company designation have added to perceived risks that likely drove Ark’s decision.
At current levels, Alibaba trades at about 15.2 times forward earnings, a relatively low valuation compared with its global peers. Investors are now looking ahead to the company’s second-quarter earnings report, expected on August 28, with consensus estimates calling for earnings per share of $2.51 on revenue of $38.72 billion, both up from a year earlier.
Analysts note that the near-term rally reflects a relief run driven by a cluster of positive catalysts, but long-term uncertainties remain around the payback timeline for Alibaba’s AI investments and the trajectory of geopolitical relations. With Alibaba also a core holding in several emerging-market ETFs, shifts in fund flows could trigger passive trading and keep volatility elevated as the tug-of-war between investors continues.
