PDD, the company that is powering fast-growing shopping app Temu, is stirring up China's Big Tech club.

On Thursday, it made headlines all over the Chinese internet that Alibaba's market cap had slid under that of PDD. This marked a historic shift in China's e-commerce space, where for years Alibaba had held the crown jewel. Now the 24-year-old incumbent is facing its greatest challenges while eight-year-old PDD catches up with an impressive ascent.

PDD, whose market value surged to over $188 billion after it posted revenue that more than doubled on the year, is still nowhere close to its all-time high of the early days of 2021. It's yet another reminder of how Alibaba slowly began sliding from the peak lately.

Alibaba's woes started in late 2020 after its founder Jack Ma publicized Chinese regulations, sending ripples across the country's tech industries. His remarks were widely blamed for the suspension of the initial public offering of Ant Group, a fintech giant he founded. In the two years following that, Beijing initiated a series of crackdowns on the internet sector in the effort to restrain powerful players like Alibaba.

As Ma retreated from public view, Alibaba had been working on splitting into six independent entities, but parts of the plan were abruptly abandoned. In September, the firm said it decided to discontinue the spin-off of its cloud computing unit, citing "uncertainties" triggered by U.S. export controls of advanced computing chips to China. It also put the planned IPO of its grocery operation Freshippo on hold. News reports in succession stripped billions of dollars from Alibaba's market capitalization.

In contrast, PDD has continued to press forward based on increasing growth in China and around the world. Over the last few years its home-grown marketplace, Pinduoduo, has grown to become a serious challenger to Alibaba's Taobao Marketplace with low prices and significant shop discounts available to buyers, but this came at a price: very high marketing expenses and significantly squeezed margins for merchants selling on its platforms.

Undeterred by its skyrocketing sales and marketing expenses — which rose to 55.6 billion yuan ($7.6 billion) in the first nine months of 2023, compared to 36.6 billion yuan in the same period last year — Temu has taken its growth recipe from China to some 40 markets. The firm generated $21.8 billion in revenues from the first three quarters of this year.

Shop like a billionaire" - this catchy tagline by Temu is paying off aggressively, because for the last 90 days, the app sat atop the shopping category in both the U.S. App Store and Google Play Store, according to data from market intelligence firm data.ai.

Temu's rise has now become a threat to industry incumbent Amazon and upstart Shein. Both targeting cost-conscious consumers and relying on supply chains in China, Shein and Temu have been locked in a legal battle but have since dropped their lawsuits against each other.

True enough, U.S. agencies had taken notice of Temu. A report by the U.S.-China Economic and Security Review Commission mandated by Congress was released as far back as April, on challenges posed by Chinese fast-fashion companies, specifically naming Temu and Shein. The stated concerns are "exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety and forced labour; and violations of intellectual property rights.

Temu might become the next TikTok if its influence continues to grow in the U.S., which will then alarm politicians who regard China-affiliated apps as posing security threats. But before any action to restrict the platform materializes, Temu will continue to attract users by relentlessly spending on ads and discounts.