Alibaba Group (NYSE:BABA; HKG:9988) saw a sharp rally on July 8, with Hong Kong shares closing 12.21% higher at HK$107.50 and U.S.-listed ADRs up 10.81% to $108.75 in late morning New York trade. The surge came on nearly triple the usual volume in Hong Kong, reflecting a wave of local buying interest.
The broader market context was mixed. Hong Kong's Hang Seng Index rose 2.99%, while the Hang Seng Tech Index jumped 4.97%. The KraneShares CSI China Internet ETF (KWEB) gained 3.25% in New York. However, South Korea's Kospi fell 5.35%, and U.S. tech stocks traded softer, with the Nasdaq down about 1% at the same time.
Buyback Provides a Floor
Alibaba disclosed a $49.99 million buyback on July 6, repurchasing 4,108,720 ordinary shares on the NYSE at an average price of about $97.34 per ADS. The stock now trades nearly 12% above that level, suggesting management stepped in near a recent low. However, the buyback represents only 0.13% of shares issued under the current plan, limiting its impact on share count.
Technical Levels Under Watch
The stock has moved above its 50-day simple moving average of $97.67 and the 100-day average of $100.53, but remains below the 200-day average of $110.99. The 14-day Relative Strength Index (RSI) stands at 82.97, indicating the rally is overstretched in the short term. For traders, the $111 level is a key resistance point that could determine the next direction.
AI Cloud Optimism vs. Cash Burn
Investor enthusiasm is fueled by Alibaba's AI cloud business. Cloud Intelligence Group revenue rose 38% to RMB41.63 billion in the March quarter, with external cloud sales up 40%. AI-linked products contributed RMB8.97 billion. CEO Eddie Wu stated that AI spending has "moved from incubation to commercialization at scale." Quick-commerce revenue also jumped 57%.
However, the cost of growth is evident. Adjusted EBITA plunged 84% to RMB5.10 billion, and non-GAAP net income was just RMB86 million. Free cash flow turned negative, with an outflow of RMB17.30 billion, driven by investments in quick commerce, AI model Qwen, and cloud infrastructure. The market is watching for operating leverage in upcoming results.
Legal Overhang Eases Slightly
A U.S. District Judge ordered the Pentagon to pause its designation of Alibaba as a Chinese military company while the court reviews the case, or for 60 days after a hearing. This removes some immediate pressure on U.S. access and reputation, though Alibaba remains on the list for now.
Outlook
The rally appears driven more by relief than a fundamental shift. Investors had priced in heavy costs for AI, delivery deals, and U.S. political risks. The buyback, court decision, and tech flows in Hong Kong provided a temporary boost. The next quarterly report will be critical: if cloud maintains its growth trajectory and quick commerce losses narrow, the stock could break above the 200-day average. But if cash burn persists, the $111 level may act as resistance rather than a launchpad.
