Alibaba (BABA) Stock; Softens Amid $431M Investment to Boost Qwen AI

TLDRs;

• Alibaba launches $431M Lunar New Year Qwen AI campaign to attract new users.
• Tencent and Baidu intensify AI competition with multi-million holiday promotions.
• DeepSeek’s R1 model pressures domestic firms to accelerate AI development.
• Alibaba’s AI push fuels global adoption in platforms like Airbnb and Pinterest.

Alibaba has announced a 3 billion yuan (US$431 million) investment to promote its Qwen AI app during the Lunar New Year holiday, signaling the company’s aggressive push to capture a larger share of China’s rapidly growing AI market.

The campaign, beginning February 6, includes a series of incentives for consumers across dining, entertainment, and leisure sectors, notably featuring the distribution of digital red envelopes, a marketing strategy designed to attract and retain users during the festive period.

The stock, however, has softened slightly amid this massive outlay, reflecting investor caution over the short-term financial impact of the promotion despite its long-term strategic goals. Analysts note that while such campaigns can boost user growth, they often increase operational costs and may weigh on quarterly earnings in the near term.

Alibaba Group Holding Limited, BABA

Rival Firms Respond With Competing Promotions

Alibaba’s move comes as competitors Tencent and Baidu roll out similar initiatives, with budgets of 1 billion and 500 million yuan (US$140 million and US$70 million), respectively. This escalation underscores the intensifying competition among China’s leading tech firms to dominate the domestic AI landscape.

Historically, Chinese tech companies leverage the Lunar New Year to engage users through promotions and gamified experiences. Tencent famously used a similar red envelope campaign in 2015, which played a key role in boosting WeChat’s dominance in mobile payments.

Alibaba’s current push mirrors that approach but with a modern AI-focused twist, positioning Qwen as a central hub for services ranging from e-commerce to digital entertainment.

DeepSeek’s R1 Model Spurs Domestic AI Race

The urgency behind Alibaba’s campaign is partly driven by the so-called “DeepSeek shock.” The launch of DeepSeek’s R1 AI model in January last year accelerated domestic competition, prompting Alibaba and other tech giants to enhance product capabilities and increase marketing efforts.

CEO Wu Yongming (Eddie Wu) has highlighted Qwen AI promotion, cloud infrastructure, and e-commerce expansion as three critical “tough battles” for Alibaba’s future.

This competition has led to daily high-spending campaigns; in late 2025, Qwen reportedly spent up to 15 million yuan per day acquiring new users. The Lunar New Year promotion represents a continuation of this strategy, emphasizing Alibaba’s commitment to rapidly scaling Qwen’s user base and integrating AI across multiple consumer touchpoints.

Chinese AI Influence Reaches Global Markets

The competition in China is not confined to domestic borders. Chinese AI models, including Alibaba’s Qwen and DeepSeek’s R1, are increasingly powering global platforms. Airbnb utilizes Qwen models for faster and cost-efficient operations, while Pinterest employs DeepSeek models in its recommendation engine.

These adoptions reflect a broader trend: Chinese AI is becoming a foundational component for international products, demonstrating the reach and influence of domestic AI firms beyond China.

With the $431 million campaign, Alibaba aims to strengthen its Qwen AI ecosystem while navigating intense competition at home. While the stock’s modest dip reflects short-term caution, the long-term implications suggest Alibaba is positioning itself to remain a central player in both domestic and global AI markets.

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