Alibaba delivered better than expected revenue in its fiscal second quarter as sales in its key cloud computing division accelerated.

Alibaba’s New York-listed shares were around 4.3% higher in premarket trade as investors looked past a plunge in profitability.

Here’s how the company did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:

• Revenue rose 5% to 247.8 billion Chinese yuan ($34.8 billion) versus 242.65 billion yuan the previous year.

Investors are focused on Alibaba’s cloud computing division which books its revenue related to artificial intelligence. Over the past few quarters, Alibaba’s cloud revenue growth has accelerated.

Alibaba reported a 34% year-on-year rise in cloud computing revenue to 39.8 billion yuan versus expectations of 37.9 billion yuan. That growth rate was faster than the 26% notched in the June quarter.

The Chinese tech giant said its investments in AI were helping its cloud unit.

“Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter,” CEO Eddie Wu said in an earnings statement on Tuesday.

In September, the company said it plans to increase spending on AI models and infrastructure development, on top of the 380 billion yuan ($53 billion) over three years it announced in February. Alibaba said on Tuesday it has spent around 120 billion yuan in capital expenditure toward AI and cloud infrastructure over the past four quarters.

Earnings before interest, taxes, and amortization (EBITA), a measure of profitability, increased by 35% to 3.6 billion yuan for its cloud division.

Alibaba has emerged as one of China’s leading AI players. On Monday, Alibaba said its Qwen app, the Chinese giant’s rival to OpenAI’s ChatGPT, surpassed 10 million downloads within the first week of its public launch. The app is powered by Alibaba’s Qwen artificial intelligence models.

Nvidia shares fell on Tuesday after The Information reported that Meta is considering using chips designed by Google.

Shares of Nvidia were 3.6% lower in premarket trade. Google-parent Alphabet was trading 3% higher after a more than 6% rally on Monday.

On Monday, The Information reported that Meta is considering using Google’s tensor processing units (TPUs) in its data centers in 2027. Meta may also rent TPUs from Google’s cloud unit next year, the publication reported.

Google launched its first-generation TPU in 2018 and it was initially designed for its own internal use for its cloud computing business. Since then, Google has launched more advanced versions of its chip that are designed to handle artificial intelligence workloads.

TPUs are a customized chip and experts say this gives Google an advantage over rivals as it can offer customers a highly efficient product for AI.

If Meta uses the TPUs, it would be big win for Google and potential validation of the technology.

Shares of Broadcom, which helps Google design its TPUs, were up more than 2% in premarket trade on Tuesday after an 11% rise the day before.

Nvidia remains the market leader with its graphics processing units (GPUs) that have become the main piece of hardware underpinning the huge AI infrastructure buildout. While Nvidia’s dominance is unlikely to be dislodged in the near term, Google’s TPUs add further competition into the AI semiconductor market.

Companies building AI infrastructure have been searching for a more diversified supply of chips to reduce reliance on Nvidia.

Meta is among the biggest spenders on AI infrastructure, with the company projecting its capital expenditure to stand between $70 billion to $72 billion this year.

The share price moves come amid continued debate around whether there is an “AI bubble” and stretched tech company valuations.

Nvidia has been central to the debate and the company last week reported a stronger-than-expected sales forecast for the current quarter but technology stocks fell after.

Alphabet on Monday resuscitated the artificial intelligence trade, which had been flagging the previous week. Its stock jumped 6.3%, lifting associated AI names such as Broadcom, Micron Technology and AMD. Major indexes rallied, with the Nasdaq Composite posting its best day in six months.

Investors were particularly enthusiastic about Broadcom because it helps to design and manufacture Google-parent Alphabet’s custom AI chips. In other words, the more market share Alphabet’s AI offerings gain, the greater the benefit to Broadcom — rather like Nvidia and the broader AI sector at the moment. Broadcom shares surged 11.1% on this notion, making it the S&P 500’s top gainer.

But while investors may cheer Alphabet’s leadership on Monday, not everyone wants it to have the last word.

“Some investors are petrified that Alphabet will win the AI war due to huge improvements in its Gemini AI model and ongoing benefits from its custom TPU chip,” Melius Research analyst Ben Reitzes wrote to clients in a Monday note. “GOOGL winning would actually hurt several stocks we cover — so prepare for volatility.”

Approaching the market’s moves from another angle, Melissa Brown, managing director of investment decision research at SimCorp, said it’s a concern when just one stock lifts the market. “That just doesn’t seem to me to be a sustainable force behind driving the market higher over the next however many days,” she added.

Alphabet on Monday may have brought about alpha — in the sense of market outperformance and potentially beginning a new phase of AI enthusiasm — but letting it be the omega as well could pose problems for investors.

U.S. tech stocks roar back. The Nasdaq Composite popped 2.69%, its best day since May 12, on investors enthusiasm over Alphabet. Other major indexes rose in tandem. Asia-Pacific markets were mostly Tuesday as AI-related stocks ticked up.

Record outflows from BlackRock’s bitcoin ETF. The iShares Bitcoin Trust ETF has seen an exodus of $2.2 billion this month as of Monday stateside, according to FactSet data. That’s almost eight times more in losses than last October, or its second-worst month on record.

Sandisk joins the S&P 500. The flash storage vendor will replace marketing company Interpublic Group in the index before trading begins on Nov. 28 stateside. Shares of Sandisk jumped 7% in extended trading on Monday.

Trump has back-to-back calls with Xi and Takaichi. But the Beijing-Tokyo spat is unlikely to be resolved soon. U.S. President Donald Trump has stayed publicly silent, adding uncertainty for Japan and Taiwan at a tense moment. 

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