China stocks: Alibaba says AI hype lifting demand for cloud computing

Yahoo Finance’s Ines Ferre joins the Live show to discuss how China stocks are trading as Chinese regulators crack down on ChatGPT.

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JARED BLIKRE: Alibaba reported third quarter results above analysts' estimates before the bell. Now, the company is saying the hype around artificial intelligence lift demand for cloud computing. But are BABA shares safe from China's crackdown on big tech? Yahoo Finance's Ines Ferre has the latest. And Ines, it's no longer about grow, grow, grow. It's about cutting your expenses and performing here.

INES FERRE: Very good point, Jared. And that's exactly the story here with Alibaba, that it used to be a company that was all about growth, a lot about spending. And now they have really been cutting their costs. And that's what the Street likes to see.

So profits were up 69% year over year. Now, this is mainly because of these cost-cutting measures. The company did away with some-- more than 4,000 employees last year. And CEO Daniel Zhang said BABA will focus on profitability and long-term growth. That's music to Wall Street's ears.

Cloud revenue was up 3%. We have seen a slowdown with its cloud revenue unit. Cloud revenue continues to be a core business for Alibaba. And Chinese commerce was up 1%. Now, the CEO said that he has seen overall weakness in 2023 but is seeing momentum when it comes to consumption in China as China reopens and recovers.

Now, Alibaba is competing with Pinduoduo and also with jd.com. And we saw that report earlier this week that jd.com is planning a subsidy program. Now, the CEO sort of shrugged off this, basically saying, look, no player can achieve a turnaround on subsidies. You need innovation, guys.

JULIE HYMAN: You need innovation. And you need lack of interference, perhaps. There's been this huge regulatory overhang for a lot of Chinese stocks for so long. Are we past that phase?

INES FERRE: It appears so. If you take a look, actually, at the stock performance, today it's up 2%. It was up earlier a little bit more than that this morning. But just taking a look at a five-year chart here, this is where Wall Street really started to get very concerned about the regulatory crackdown that the government had launched just a couple of years ago. You'll remember that BABA's-- Alibaba's affiliate Ant Group, they had to call off that IPO back in 2020.

Now, the government last year sort of took the strings off of the tech sector, so to speak. It's grip is no longer as hard as it was at one point. So that's where you saw the stock sort of recover once the government signaled that it was-- that the tech sector was going to be clear of interference from the government because, look, the Chinese government has basically been putting growth above all else. And that's what we saw with the easing of regulations last year.

JULIE HYMAN: Interesting. Thanks so much, Ines, appreciate it. And BABA, by the way, one of the top Trending Tickers on Yahoo Finance today.