Is Alibaba Stock's Rally Just Getting Started? AI Chip Rumor Adds Fuel To Fire Sparked By Q1 Results Amid Wall Street Optimism

Shares of Alibaba Group Holding Ltd. (BABA) remain on the radar of retail investors after the Chinese e-commerce giant reported strong earnings for the June quarter last Friday, and rumors suggested that the company is developing an artificial intelligence (AI) chip.

The sustained interest follows Wall Street analysts raising their expectations for the company and reports that an Alibaba-backed robotics company has confidentially filed for an initial public offering (IPO) in Hong Kong.

A CNBC report, citing two people familiar with the matter, stated that Alibaba is developing an AI chip designed for inference, rather than training large-language models (LLMs). The rumored move comes amid the U.S. ban on high-performance computing chip exports to China amid national security concerns.

The stock was among the trending equity tickers on Stocktwits early Tuesday. The 24-hour message volume on the Alibaba stream spiked by 360% leading up to late Monday.

On Stocktwits, retail sentiment toward Alibaba's stock stayed 'extremely bullish' (87/100) by early Tuesday, and the message volume was 'extremely high.'

A bullish watcher expected the stock to trade above $150 on Tuesday before going past $200 by the end of the week.

Another user said both technicals and fundamentals point upwards, adding that“there is going to be a shakeout to clear the paper hands.”

The quarterly results released on Friday showed sales rising a modest 2% year-over-year (YoY) to $34.57 billion, but the company's Cloud Intelligence unit revenue climbed 26%.

Quarterly net income per share jumped 76% YoY to $5.9 billion. 

Alibaba's stock received a string of price target boosts following the results, The Fly reported.

• BofA Securities maintained a 'Buy' rating and raised the price target for Alibaba's U.S.-listed stock to $152 from $135. The firm lauded the company for an in-line quarter, positive cloud growth and robust e-commerce business.
• Citi left its rating for Alibaba unchanged at 'Buy' and raised the price target to $187 from $148, based on strong cloud revenue growth in the June quarter and management's confidence in sustaining this growth going forward.
• UBS maintained a 'Buy' rating and upped the price target to $162 from $158. The firm expressed comfort at the fact that the management addressed several key investor concerns regarding e-commerce investments and AI cloud growth.
• Bernstein analyst Robin Zhu maintained an 'Outperform' rating and raised the price target to $160 from $145. 

Separately, a Bloomberg report, citing people familiar with the matter, stated late Monday that Quicktron Robotics, backed by Alibaba and a venture capital fund under the Saudi Arabian Oil Co, plans to raise at least $100 million as early as next year through an IPO. Quicktron, founded in 2014, is a manufacturer of self-driving forklifts and other robots used in warehouses.

Alibaba's stock has soared about 62% year-to-date. The Koyfin-compiled average analysts' price target for the stock is $160.43, implying roughly 19% upside potential.

The company's Hong Kong-listed stock fell about 0.60% after soaring 18.5% on Monday. In overnight trading, the U.S.-listed stock surged by over 3%, 

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