Why Alibaba Stock Is Surging Today

Shares of Alibaba Group Holding (NYSE: BABA) were flying higher on Wednesday. The company's stock gained 1.9% as of 1:50 p.m. ET, but rose as much as 5.5% earlier in the day. The move up comes as the S&P 500 (SNPINDEX: ^GSPC)and Nasdaq Composite (NASDAQINDEX: ^IXIC) lost 0.6% and 0.9%, respectively.

Just days after the market punished AI stocks upon the release of the Chinese artificial intelligence chatbot DeepSeek, Alibaba released the latest version of its Qwen AI model.

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DeepSeek makes a splash

News of DeepSeek shocked the market, sending shares of U.S. AI stocks lower Monday. Although there has been some recovery, fears remain, given just how efficient DeepSeek is compared to its U.S. counterparts. The team behind the Chinese model claims it was trained for a small fraction of the price, and with inferior chips due to U.S. export restrictions.

Alibaba doesn't want to be left behind

Alibaba released the latest version of its AI model, Qwen 2.5-Max, on Wednesday. The company claims its latest version is more powerful than DeepSeek's. Interestingly, however, the claim is that it is more powerful than DeepSeek-V3, not R1, the latest and most powerful version that shocked Silicon Valley. It appears that DeepSeek still has the edge. Regardless, it was enough for Alibaba's stock to see a boost.

Alibaba and other Chinese AI companies are still on their heels, playing catch-up to DeepSeek. After the latter released its V2 model, Alibaba cut prices up to 97% on its offerings. The company has its work cut out for it to keep pace with its upstart rival.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.