Alibaba Group (NYSE: BABA) has long been a dominant force in the Chinese and global e-commerce markets. However, in recent years, the stock has faced significant volatility due to regulatory pressures, macroeconomic uncertainty, and competitive challenges. Despite these headwinds, Alibaba is demonstrating signs of a strong recovery, fueled by AI advancements, e-commerce strength, and its evolving cloud business.
With shares showing renewed momentum and strategic shifts enhancing long-term growth potential, BABA presents a compelling long-investment opportunity. This in-depth analysis explores key reasons why investors should consider going long on Alibaba.
1. Alibaba’s AI Breakthrough: A Game-Changer in the Tech Race
One of the most exciting developments for Alibaba in 2025 is its rapid progress in artificial intelligence (AI). The company recently unveiled Qwen 2.5 Max, an advanced AI model that is making waves in the competitive landscape.
- Outperforming DeepSeek and GPT-4 – Recent benchmark tests indicate that Alibaba’s Qwen 2.5 Max surpasses rivals like DeepSeek and OpenAI’s GPT-4 in several areas, particularly in Chinese language understanding and enterprise AI applications.
- AI Cloud Expansion – Alibaba is integrating its AI capabilities into its cloud computing division, offering enterprise clients powerful AI-driven solutions, and enhancing its market competitiveness.
- Monetization Potential – The AI model’s applications span across e-commerce, advertising, logistics, and enterprise services, paving the way for revenue growth in multiple segments.
Alibaba’s AI advancements mark a significant shift, positioning the company as not just an e-commerce giant but also a leading player in the AI infrastructure space.
2. E-Commerce Resurgence: A Key Revenue Driver
Despite economic challenges, Alibaba’s core e-commerce business remains resilient and is regaining momentum.
- Strong Online Retail Performance – Sales in Alibaba’s Taobao and Tmall platforms have shown steady growth, driven by increased consumer spending and enhanced AI-driven recommendation algorithms.
- International Expansion – Alibaba’s global e-commerce operations, particularly through AliExpress and Lazada, are growing rapidly, diversifying its revenue streams beyond China.
- Live Commerce and AI-Enhanced Shopping – The company is integrating AI into live-stream shopping, boosting engagement and conversion rates.
With consumer sentiment improving and Alibaba leveraging AI to refine its shopping ecosystem, its e-commerce division remains a dominant and high-margin revenue source.
3. Cloud Computing: A Sleeping Giant Ready to Grow
Alibaba Cloud has long been one of the company’s most promising segments, but it has faced growth deceleration in recent years. However, with AI-driven computing demand surging, Alibaba Cloud is poised for a turnaround.
- AI Infrastructure Leadership – As enterprises adopt AI-driven workloads, Alibaba Cloud is positioned to capitalize on this demand with its cutting-edge AI models and computing power.
- Cost Optimization and Profitability Focus – The company has been streamlining its cloud operations, improving efficiency, and focusing on high-margin enterprise solutions.
- Potential Spinoff Catalyst – Although Alibaba postponed its cloud spinoff plans, any future revival of the initiative could unlock significant shareholder value.
With AI computing driving the next wave of cloud adoption, Alibaba Cloud is emerging as a critical component of the company’s long-term growth.
4. Valuation: BABA Remains Undervalued Compared to Peers
Despite recent gains, Alibaba’s stock remains attractively priced, offering a compelling valuation relative to its U.S. tech counterparts.
- Low Price-to-Earnings (P/E) Ratio – BABA trades at a discount compared to global e-commerce and cloud peers like Amazon, making it an appealing value play.
- Share Buybacks and Cost-Cutting Initiatives – Alibaba has been aggressively repurchasing shares, reducing outstanding stock and enhancing shareholder returns.
- Potential Upside to $150+ – Given its improving fundamentals, many analysts expect Alibaba stock to rally significantly from current levels.
For investors seeking exposure to China’s tech resurgence at a reasonable valuation, Alibaba presents a strong buy-and-hold opportunity.
5. Regulatory Pressures Are Easing, Providing a Clearer Path for Growth
A key reason for Alibaba’s stock struggles over the past few years has been regulatory scrutiny in China. However, 2025 has seen a more supportive policy environment.
- Tech Crackdown Softening – Chinese regulators have signaled a more market-friendly approach, easing restrictions on tech companies.
- Government Support for AI and Cloud Innovation – China is prioritizing AI and cloud computing development, which aligns with Alibaba’s long-term strategy.
- Improved Investor Sentiment Toward Chinese Stocks – With regulatory risks receding, institutional investors are beginning to re-enter Chinese tech stocks, supporting higher valuations.
As regulatory concerns fade, Alibaba is positioned to regain investor confidence and unlock significant upside potential.
6. Short-Term Volatility but Long-Term Growth Potential
While Alibaba remains a strong long-term investment, short-term volatility is likely to persist, making it a prime candidate for options trading.
- Options Market Activity – Increased trading volume in Alibaba options suggests traders are positioning for near-term price swings.
- Earnings and AI Developments as Catalysts – Upcoming earnings reports and further AI advancements could trigger significant stock movements.
- Swing Trading Potential – Traders can capitalize on short-term price action, while long-term investors can take advantage of dips to build positions.
For those willing to navigate short-term swings, Alibaba offers both trading and long-term investment opportunities.
Final thoughts
Alibaba’s stock is poised for a strong recovery, driven by:
AI Leadership—Competing with global AI giants and outperforming DeepSeek.
E-Commerce Strength—Resilient consumer spending and growing international presence.
Cloud Computing Upside—AI-driven demand fueling cloud growth.
Undervalued Stock—Attractive pricing compared to global tech peers.
Regulatory Tailwinds—Reduced government intervention supporting market confidence.
With the Chinese tech sector showing renewed strength and Alibaba positioning itself as a leader in AI, cloud, and e-commerce, the stock presents a compelling long-term investment opportunity.
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