On 12 January (US Eastern time), US-listed Chinese stocks – led by names such as Alibaba and Bilibili – rallied sharply, sweeping away the choppy trading seen in prior sessions. This was not an isolated move by a few names, but a sector-wide surge driven by tech stocks. The key questions now are: why did sentiment erupt so forcefully on this particular day, and what signals is the leading mover Alibaba sending to the market?

Drivers Behind the Broad Rally in US-Listed Chinese Stocks

This upswing is a classic case of a technical rebound meeting external tailwinds: after earlier pullbacks had built up demand for a bounce, two pieces of news helped light the fuse. First, global AI sentiment improved as talks between Apple and Google over using customised Gemini models to power AI features boosted confidence in the commercial rollout of AI, with optimism spilling over into Chinese tech names across the AI value chain. At the same time, worries about the Federal Reserve’s independence lifted safe-haven assets and prompted some capital to rotate into Chinese assets, which had been trading at relatively depressed levels and were seen as offering lower short-term volatility.

Beyond external sentiment, this latest surge in Chinese ADRs is also underpinned by an internal “China logic”, mainly reflected in three aspects:

1. AI: From Concept to Real-World Deployment

The leaders of this rally were heavily concentrated in AI compute and application names – not by coincidence. The market has started to price in the actual revenue potential of AI technologies rather than just the story.Take Alibaba Cloud as an example: downloads of its Tongyi Qianwen series models on Hugging Face – the world’s largest open-source AI community – have now exceeded 700 million. Such a powerful developer ecosystem points to significant potential commercial value and injects fresh imagination into tech valuations.

2. A Warmer Policy Backdrop

At the macro level, positive signals are emerging. China’s commerce authorities announced that China and the EU have reached a negotiated settlement on the electric-vehicle investigation, achieving a “soft landing”.This outcome helps stabilise expectations around China-EU economic and trade relations, eases concerns along the relevant industrial chains, and provides sentiment support for sectors including new-energy vehicles.

3. Re-rating of Bellwether Names

Alibaba’s sharp rise, in particular, is backed by solid institutional views. Banks such as JPMorgan argue that while the company’s investments to expand its quick-commerce business and generative-AI efforts may weigh on near-term profits, these negatives have largely been priced in.More importantly, the market focus is shifting toward the visibility of growth in its cloud business: as generative-AI workloads move from pilot projects to broad deployment, Alibaba Cloud’s revenue is expected to accelerate over the coming quarters. This shift in perspective – from “worrying about spending” to “anticipating growth” – is the crux of the valuation repair story for leading names.

Outlook

As the “ballast stone” of US-listed Chinese stocks, Alibaba’s share-price performance carries strong signalling value. The latest surge can be seen as a staged endorsement of its “dual engines” strategy of consumption plus AI. As noted above, the accelerating growth outlook for Alibaba Cloud is a key driver.In addition, its continued investment and patent filings at the AI infrastructure layer – including technologies such as improved video-decoding efficiency and virtual-environment reconstruction – highlight its reserves for the next generation of internet technologies. After a prolonged period of adjustment, Alibaba’s valuation is now at a historically low range. Once its core business (cloud computing) shows clear signs of renewed momentum, it becomes easier to attract long-term capital back into the name, potentially triggering a large-scale valuation re-rating.That said, the macro environment remains the anchor for the entire Chinese ADR universe. Any upside surprises in data or policy could act as further catalysts for gains – and disappointments, conversely, would likely translate into renewed pressure.