To The Moon

Alibaba stocks jumped on Wednesday following their leadership pledged to boost spending on AI initiatives and they also announced a software deal with Nvidia (NVDA) to integrate the chip giant's AI development tools used for trading for robotics.

In this article I would like to discuss what this partnership mean for the broader AI race dynamics, we will break it down into Alibaba-specific implications, Nvidia’s positioning, and the broader AI race dynamics:

Alibaba’s Positioning

• Commitment to AI Capex: By pledging fresh spending, Alibaba is signaling to investors that it wants to catch up in the AI infrastructure and application race, not just in China but globally.

• Vertical AI Integration: The deal with Nvidia isn’t just about chips — it’s about integrating software tools for robotics and trading. This goes beyond “cloud AI compute” and into practical, revenue-driving verticals (fintech + industrial automation).

• Signal to Competitors: Tencent, Baidu, and ByteDance will feel pressure to step up AI-related spending, especially in robotics and industrial use cases.

If we looked at how the share price of $Tencent Music(TME)$ and $Baidu(BIDU)$ are trading against $Alibaba(BABA)$, we will notice that there have been some signs of decline, as TME and BIDU are feeling the pressures to keep up with the spending on AI-related infrastructure or software, and investors sentiment and confidence might be shaken as well.

Nvidia’s Strategic Role

• Deepening Moat: Nvidia already dominates in GPUs, but software integration (CUDA, cuDNN, TensorRT, Omniverse for robotics) is its “stickiness layer.” By embedding its toolchains in Alibaba’s AI systems, Nvidia ensures developers in China (and beyond) stay tied to its ecosystem.

• Diversifying Partnerships: Despite U.S.–China tensions, this shows Nvidia is still finding ways to stay relevant in the Chinese AI buildout (via software/IP licensing, rather than shipping only top-end GPUs restricted by export rules).

• Reinforces "Nvidia as OS for AI": If GPUs are the hardware, Nvidia’s toolchains are becoming the “operating system” for AI applications.

If we revisit $NVIDIA(NVDA)$ business model, we can see that Alibaba sits well in the plan to expand its key partners and also areas like revenue stream and customer segment will improve. We should be seeing similar ecommerce or cloud provider beefing up their partnership with Nvidia.

Broader AI Race Dynamics

• China’s AI Strategy Evolution: This deal accelerates China’s ability to close the gap in applied AI (robotics, logistics, trading systems). While the U.S. still leads in foundation model breakthroughs (OpenAI, Anthropic, Google DeepMind), China is leaning hard into applied AI monetization.

• AI is Becoming Verticalized: The “AI race” is no longer just about building bigger models. Partnerships like Alibaba–Nvidia show the next phase is embedding AI into specific industries (trading, manufacturing robotics, logistics, healthcare).

• Competitive Ripple Effects: Expect rivals like Microsoft (with OpenAI), Amazon (AWS Trainium/Inferentia chips + Bedrock), and Google (Gemini + DeepMind robotics) to announce similar industry-focused AI partnerships.

• Possible Regulatory Friction: U.S. policymakers could scrutinize this deal if they view Nvidia’s software as sensitive. Any tightening could accelerate China’s push to develop domestic alternatives (e.g., Huawei Ascend ecosystem, Baidu Kunlun chips).

Bottom Line

This partnership does not flip the global AI race overnight, but it cements Nvidia’s role as the indispensable enabler and helps Alibaba reposition as more than just an e-commerce/cloud player.

The dynamics are shifting from “who has the biggest LLM” to “who can productize AI across industries fastest.” This could accelerate AI adoption curves in robotics and fintech globally, forcing other hyperscalers to move faster.

In the next section we will discuss how we have structure the development as a scenario framework for Alibaba (BABA) and Nvidia (NVDA), looking out 6–12 months.

The focus will be on the partnership impact, but also consider broader AI market sentiment, China/U.S. policy, and competitive dynamics.

Scenario Map: Alibaba & Nvidia (6–12 Months)

Alibaba (BABA)

Bull Case (30% probability)

Drivers:

• AI investment narrative attracts capital (like how U.S. tech rerated on AI).

• Successful early deployment of Nvidia’s AI tools into Alibaba Cloud → new enterprise clients.

• AI-driven efficiencies in e-commerce & logistics visibly boost margins.

• Regulatory backdrop in China remains stable.

Market Reaction:

• Investor perception shifts: BABA seen as not just “China e-commerce” but “China AI Cloud + Robotics enabler.”

• Multiple expansion from depressed levels.

Target: $238–265 (+35–50% upside).

Base Case (50% probability)

Drivers:

• AI integration mostly PR for now — financial impact limited in FY2026.

• Alibaba Cloud gets incremental adoption but competitive pricing caps margin gains.

• Core e-commerce stabilizes, but growth remains modest.

Market Reaction:

• Partnership is seen as positioning move, not near-term earnings driver.

• Stock tracks broader China tech sentiment.

Target: $194–212 (10–20% upside).

Bear Case (20% probability)

Drivers:

• U.S. export rules tighten → Nvidia software access gets restricted.

• AI spending eats into margins without clear payback.

• Macro slowdown in China reduces enterprise demand for AI adoption.

Market Reaction:

• Partnership seen as costly distraction.

• Valuation remains capped by geopolitical overhang.

Target: $150–159 (10–15% downside).

We need to be aware that for longer term, if we looked at the monthly timeframe, BABA might experience a pullback as it is currently trading far from the 12-EMA period, but that would mean this might be a good time to look at loading up when BABA pull back a little.

Nvidia (NVDA)

Bull Case (40% probability)

Drivers:

• Alibaba partnership reinforces Nvidia’s software moat.

• Monetization of toolchains + licensing adds high-margin recurring revenue.

• Demand outside U.S. offsets export restrictions.

• Robotics/vertical AI adoption sparks new growth leg (beyond LLM/data center boom).

Market Reaction:

• Investors view Nvidia as “AI Operating System,” not just hardware.

• Higher valuation multiple sustained.

Target: $211–228 (+20–30% upside from ~$176).

Base Case (45% probability)

Drivers:

• Deal adds some incremental software adoption, but contribution is marginal vs. core GPU revenues.

• Export policy limits scale in China.

• Growth in AI demand remains strong but moderates from 2023–24 frenzy.

Market Reaction:

• Partnership supportive, but not stock-moving on its own.

• Stock trades with broader AI hardware cycle.

• Target: $176-193 (flat to +10% upside).

Bear Case (15% probability)

Drivers:

• U.S. regulators curb Nvidia’s ability to provide software/IP to Chinese hyperscalers.

• Broad AI enthusiasm cools (slower enterprise adoption, capex digestion).

• Competition (AMD MI300, custom chips, Huawei Ascend) erodes margins.

Market Reaction:

• Partnership fails to materialize in revenue.

• Investors rotate out of “AI overcrowded trade.”

Target: $149-158 (10–15% downside).

Similarly, we are also seeing NVDA experiencing some pullback before making a small upside, and this trend might continue unless we get a strong catalyst to power the semiconductor and chips market.

Takeaways

• For Alibaba → upside is more about narrative and multiple expansion than immediate earnings, but could re-rate if execution is solid.

• For Nvidia → upside is more about strategic moat building, reinforcing dominance even if export rules cap hardware.

• AI Race Implication → accelerates the “vertical AI” shift (fintech, robotics, logistics), pushing investors to think beyond LLM cloud wars.

Summary

Alibaba's stock jumped ∼9% on Wednesday after announcing a major acceleration of its AI initiatives, including increasing its already significant infrastructure spending (previously ∼$53 billion).

The key driver was a "milestone collaboration" with Nvidia to integrate the chip giant's full "physical AI" software stack into Alibaba Cloud. This partnership is specifically aimed at advancing fields like humanoid robotics and industrial automation, alongside new AI models like the trillion-parameter Qwen3-Max.

Impact on AI Development Dynamics:

This partnership shifts the focus to "Physical AI." While the general AI race has focused on large language models (LLMs) and chatbots, this deal emphasizes building real-world, embodied AI systems (robots, autonomous vehicles). By combining Nvidia's specialized software for simulation and development with Alibaba's massive cloud platform and enterprise reach, the collaboration creates a significant development ecosystem for this next-generation AI.

Effect on the Broader AI Race:

The deal intensifies the global AI race by providing China's largest cloud provider with access to world-leading AI development tools (though high-end chip exports remain restricted). It positions Alibaba as a formidable competitor in the AI-as-a-Service (AIaaS) market, challenging both domestic rivals and global giants like Microsoft and Amazon in the race to provide the necessary full-stack infrastructure for both digital and physical AI.

Appreciate if you could share your thoughts in the comment section whether you think Nvidia would get a boost from this Alibaba partnership and also manage to stay at the top of the AI chips race.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.