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Alibaba: The AI Giant Hiding in Plain Sight
Alibaba Group Holding Limited (NYSE: BABA) is one of the most polarizing stocks of the last decade. Once hailed as China’s answer to Amazon, its share price today sits near the same level it first hit in late 2014 — a sobering reminder that even world-class businesses can deliver decade-long dead money for investors.
Yet buried beneath years of regulatory pressure, geopolitical headlines, and disappointing returns is a company making one of the most aggressive artificial intelligence pivots in the world. If that pivot succeeds, Alibaba’s stock — now trading at valuation multiples far below global AI peers — could have asymmetrical upside.
A Cautionary Tale for Long-Term Holders
Alibaba’s stagnant chart is a case study in how market darlings can become value traps. Legendary investors like Charlie Munger and Michael Burry publicly took big swings at the stock, drawn to its dominant market position and low valuations, only to see the investment soured by Beijing’s crackdown on Chinese tech platforms starting in 2020.
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Munger’s Bet: Through the Daily Journal Corporation, he accumulated nearly 600,000 shares at one point — calling Alibaba “Amazon on steroids” — before cutting the position in half at a loss.
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Burry’s Experience: Known for his “Big Short” housing market call, Burry also struggled with Alibaba exposure during its multi-year slump.
For some, these high-profile stumbles have rendered Alibaba and other Chinese equities “uninvestable.” But to contrarians, that extreme negative sentiment can create fertile ground for opportunity — especially when fundamentals are shifting in the company’s favor.
The ‘All-In AI’ Strategy
Alibaba is no longer just an e-commerce and cloud business. Since 2023, it has been executing an “all-in AI” strategy aimed at making it China’s dominant AI ecosystem. This includes:
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Massive Capital Commitment: At least RMB 380 billion (~$53 billion) earmarked for AI cloud infrastructure over three years — more than the company spent on its cloud build-out over the previous decade.
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Qwen AI Model Leadership: The “Qwen” family of large language models is considered a market leader in China, used by sectors from manufacturing to finance. Over 200 models have been open-sourced and downloaded more than 300 million times.
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Apple Partnership: Apple selected Qwen to power on-device AI functions for iPhones sold in China.
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Cutting-Edge Applications: Alibaba’s AI models are being used for everything from cancer diagnostics to weather forecasting.
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Recognition: Named one of Time’s “100 Most Influential Companies” for its AI contributions, and ranked alongside AWS, Google Cloud, and Microsoft Azure in Omdia’s GenAI leadership report.
Importantly, revenue from AI-related products has now posted seven straight quarters of triple-digit year-over-year growth.
Financial Strength Meets Low Valuation
Despite competitive pressures in e-commerce, Alibaba’s profitability remains robust:
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Net Cash Position: ~$50.5 billion at the end of March 2025.
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Core Revenue Growth: +10% year-over-year (excluding certain offline retail assets).
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Cloud Intelligence Group: Growth accelerated to 17.7% in the most recent quarter.
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Marketplace Health: Customer management revenue at Taobao and Tmall rose 12%, reflecting better user engagement and monetization.
Yet shares trade at a forward P/E below 11.5 and an EV-to-revenue ratio under 2 — levels that are historically cheap for Alibaba and almost unheard of for a major AI platform.
The Geopolitical Variable
No Alibaba thesis is complete without addressing geopolitical risk. Regulatory unpredictability, the U.S.–China tech rivalry, and the company’s Variable Interest Entity (VIE) structure — where U.S. shareholders own claims on a Cayman Islands holding company rather than the Chinese operating entity — remain real considerations.
That said, recent signals between Beijing, Washington, and Moscow suggest a tentative easing of tensions:
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Xi Jinping recently voiced support for improved U.S.–Russia relations and a political resolution to the Ukraine conflict.
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Diplomatic engagement has increased ahead of a scheduled Trump–Putin summit in Alaska.
If U.S.–China relations continue to stabilize, risk perceptions toward Alibaba could improve sharply.
Technical Setup
From a chart perspective, Alibaba is holding above key moving averages near $110. A breakout above recent highs could confirm bullish momentum. Traders eyeing entries may prefer to see that level cleared before sizing up positions. But if you’ve been with us for even just a short time, you probably know that I am not the biggest proponent of using technical analysis, so let’s just call this a little gift for the chart stalkers.
Risk-Reward Profile
Bull Case:
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Cheap relative to global AI leaders.
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Strong balance sheet to fund AI expansion.
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Leadership in China’s AI ecosystem.
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Improving macro backdrop could spark multiple re-rating.
Bear Case:
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Geopolitical flare-ups can erase gains overnight.
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VIE structure limits shareholder rights.
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Intense competition from other Chinese tech giants.
Bottom Line:
Alibaba isn’t a “buy and forget” stock. It’s a situation that demands active risk management — stops, options, or position sizing discipline. But for those willing to stomach the volatility, the upside potential from its AI transformation and low valuation could outweigh the risks.
My Final Take: Alibaba is an AI heavyweight trading at bargain-bin prices. Just don’t confuse a deep discount with a free lunch — in this stock, the market is paying you to take the geopolitical risk. Whether you cash in or get burned will depend on both AI execution and the headlines out of Beijing and Washington.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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