Alibaba has spent the past week reminding the market, and its rivals, that its future lies in the cloud. In a rare display of technical openness, the company lifted the curtain on how its in-house engineers have quietly reinvented the plumbing that keeps its services online. And just a day earlier, investors sent its Hong Kong listed shares soaring 19%, driven by accelerating growth in its cloud unit and reports of a homegrown AI chip.
On the surface, those may look like separate storylines: one highly technical, the other financial. But together they reveal the same truth, that Alibaba is racing to secure a central role in the global AI economy by owning not just the software and services, but the very infrastructure that underpins them.
At next week’s SIGCOMM 2025 conference (the flagship annual conference of the Special Interest Group on Data Communication), Alibaba’s cloud engineers will present a trio of innovations designed to boost uptime and efficiency at hyperscale.
One, called ZooRoute, reroutes traffic across its vast networks in milliseconds, cutting outages by more than 90%. Another, Hermes, fine-tunes traffic distribution at the application layer, reducing daily failures to near zero and trimming nearly a fifth from infrastructure costs. A third, Nezha, squeezes more performance out of existing SmartNICs by redistributing workloads dynamically.
These breakthroughs won’t make headlines in the same way as a flashy chatbot or a breakthrough in generative AI. But they matter just as much, if not more. Running artificial intelligence at scale requires computing muscle, bandwidth, and rock-solid reliability. Alibaba is signalling that it can deliver all three on its own terms, without waiting for solutions from external vendors.
That foundation is already paying off. Last week the company disclosed that revenue from AI-related products has grown at triple-digit rates for eight consecutive quarters, fuelling a 26% year-over-year jump in its Cloud Intelligence Group. This growth has turned what was once seen as a sideline to Alibaba’s e-commerce empire into its most watched division. Speculation that the company has also developed a new AI chip, potentially reducing reliance on Nvidia, only added fuel to the fire. In a market where China is eager to cut its dependence on U.S. technology, that prospect carries enormous weight.
The surge in Alibaba’s stock suggests investors now view the cloud strategy as the company’s best chance to capture Microsoft and Google like momentum in monetising AI. The playbook is familiar: build the infrastructure, attract developers and enterprises, and then layer on proprietary models and services that can be sold at scale. Microsoft has done it with Azure and its tie-up with OpenAI. Google has done it by embedding AI into nearly every corner of its ecosystem. Alibaba, by contrast, is still in its early phases but last week’s twin announcements show it is moving with intent.
What makes Alibaba’s approach distinctive is its emphasis on vertical integration. By designing not only its software stack but also the hardware and the underlying network architecture, the company is betting it can control costs, improve performance, and insulate itself from supply-chain or geopolitical shocks. It is a play both for efficiency and for sovereignty, particularly important given the backdrop of U.S. export restrictions on advanced chips.
That strategy, however, comes with challenges. Competing with Nvidia on chips is a tall order. Matching the developer ecosystems of Microsoft or Google will not happen overnight. And Alibaba still has to balance these cloud ambitions with its core e-commerce business, which remains a vital cash generator even as margins tighten. Investors may have cheered the recent news, but sustaining that momentum will depend on execution across multiple fronts.
Still, the events of the past week feel like a turning point. By showcasing not just glossy AI applications but also the gritty engineering breakthroughs beneath them, Alibaba is signalling that it wants to be known not only as China’s retail giant but also as a serious contender in the race to build the backbone of the AI era.
In other words, Alibaba isn’t just riding the AI wave—it’s laying the track for where that wave will go next.
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Image: © Alibaba Group Source: www.alibabagroup.com
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