Free Trial

Will Alibaba’s $53B AI Bet Be the Key to Tech Supremacy?

Dhaka,Bangladesh 11 Oct 2024:Alibaba group logo displayed on a smartphone. — Stock Editorial Photography

Key Points

  • Alibaba shares are soaring in 2025, fueled by impressive earnings and strong market momentum.
  • The company is investing tens of billions in cloud computing and AI, positioning itself for long-term growth.
  • As China races to compete with the U.S. in AI, Alibaba is poised to be one of the biggest beneficiaries.
  • Interested in Alibaba Group? Here are five stocks we like better.
Remove Ads

Alibaba Group Today

Alibaba Group Holding Limited stock logo
BABABABA 90-day performance
Alibaba Group
$132.49 -3.14 (-2.32%)
As of 03/28/2025 03:59 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$68.36
$148.43
Dividend Yield
0.74%
P/E Ratio
19.15
Price Target
$148.14

Shares of Alibaba Group NYSE: BABA are on a tear to start off 2025. The consumer discretionary and tech stock is up by 52% this year as of the Feb. 25 close. The company’s cloud computing business impressed investors in its latest earnings release on Feb. 20.

Shares rose 8% in response. A few days later, Alibaba said it plans to spend more than $52 billion on cloud computing and AI infrastructure in the next three years.

So, what should we make of these recent developments around Alibaba? Will its strength continue and allow the stock to be a big long-term winner? I’ll look to answer these questions by diving into the firm’s recent earnings and analyzing its strategic positioning.

Breaking Down Alibaba’s Impressive Earnings Results

In Alibaba’s latest results, its revenues were essentially in line with what analysts expected. However, the big beat came on adjusted earnings per share. Its $2.95 figure surpassed forecasts by over 10%. Growth in the company’s cloud intelligence and international digital commerce segments was impressive. The former grew by 13%, and the latter by 32%.

Impressively, Cloud Intelligence revenue growth has been accelerating every quarter for some time now. In Q4 2023, this part of the business grew by less than 3%. Chief Executive Officer (CEO) Eddie Wu mentioned that AI-related products have been key to this. Revenue from these products grew by over 100% for the sixth consecutive quarter. Its Chinese e-commerce segment, known as Taobao and Tmall, saw sales rise moderately by 5%.

Understanding BABA’s Cloud and AI Position

Alibaba’s $53 billion investment plan for cloud and AI infrastructure over three years equates to around $18 billion a year. That’s significantly less than the approximately $40 billion Microsoft NASDAQ: MSFT is looking to invest over just the next two quarters. However, it is still very large when considering that Alibaba’s cloud business is much smaller.

Remove Ads

Alibaba Group Stock Forecast Today

12-Month Stock Price Forecast:
$148.14
11.81% Upside
Buy
Based on 15 Analyst Ratings
Current Price$132.49
High Forecast$190.00
Average Forecast$148.14
Low Forecast$100.00
Alibaba Group Stock Forecast Details

The company's cloud revenue reached $14 billion in the last year. Microsoft's Intelligent Cloud revenue of nearly $26 billion just last quarter completely dwarfs this amount. However, compared to the size of its cloud computing business, Alibaba's planned spending is significantly larger.

To be clear, Alibaba isn’t competing directly with companies like Microsoft. It is competing with other Chinese companies in cloud computing. Still, comparing this planned spending highlights that the race to "win AI" isn't just happening among U.S. companies. Many see advancing AI as an existential national security issue, and China can’t simply sit still.  

Winners will emerge in that country just as they will in the United States. As of Q3 2024, Alibaba held the largest market share of cloud infrastructure revenue in China at 36%. That is almost double that of the next closest player. Right now, Alibaba appears to be the leading horse and is making a huge commitment going forward.

Government-Related Considerations and Final Thoughts on BABA

For several years now, investing in the Chinese stock market has been difficult. Over the past five years, the iShares MSCI China ETF NASDAQ: MCHI has provided a total return of -4%. In the same period, the S&P 500 Index has had a return of nearly 99%. Government interference in the economy has caused major turmoil. Many investors avoid the country's stocks completely. However, this also suggests that these stocks may have significant potential to appreciate.

In my view, the Chinese government must unleash its private tech companies to compete with the U.S. in AI. There is evidence that tensions between government officials and tech leaders in the country are easing.

Chinese President Xi Jinping had a rare meeting recently with key Chinese tech leaders, including Alibaba founder Jack Ma. The meeting was pro-business, indicating the government is moving toward working more with its tech companies than against them.

Overall, someone is going to have to help China advance its cloud and AI technology. There doesn’t appear to be anyone more equipped to do that at this point than Alibaba. Given trends in the business and Chinese government signaling, I’m bullish on shares of Alibaba. Some Wall Street analysts see the near-term rally as far from over as well. The average implied upside of seven price targets tracked by MarketBeat post earnings is 24% as of the Feb. 25 close.

Should You Invest $1,000 in Alibaba Group Right Now?

Before you consider Alibaba Group, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alibaba Group wasn't on the list.

While Alibaba Group currently has a Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 AI Stocks to Invest in Today: Capitalizing on AI and Tech Trends in 2025 Cover

Discover the top 7 AI stocks to invest in right now. This exclusive report highlights the companies leading the AI revolution and shaping the future of technology in 2025.

Get This Free Report
Leo Miller
About The Author

Leo Miller

Contributing Author

Fundamental Analysis, Economics, Industry and Sector Analysis

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alibaba Group (BABA)
4.5441 of 5 stars
$132.49-2.3%0.74%19.15Buy$148.14
Microsoft (MSFT)
4.9416 of 5 stars
$378.80-3.0%0.88%30.50Moderate Buy$510.59
Compare These Stocks  Add These Stocks to My Watchlist 

Remove Ads

Featured Articles and Offers

Recent Videos

Time to Buy SoFi? Fintech’s Next Big Move
3 Chip Stocks Primed for a Comeback—Have They Found the Bottom?
Why Palantir’s Future Just Got a Massive Boost

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines

Remove Ads