Buy Or Fear Alibaba Stock After AI Surge?
Alibaba stock’s (NYSE:BABA) comeback has been nothing short of dramatic. After languishing for much of the past few years under the weight of regulatory pressures, sluggish Chinese consumption, and intensifying e-commerce competition, the stock has staged a spectacular rally in 2025. Shares have nearly doubled since January and surged another 30% in September alone, making Alibaba one of the year’s top tech performers. The catalyst? A decisive pivot to generative AI, where Alibaba’s progress in cloud, chips, and large language models has not only revived investor confidence but also put the company on a more level playing field with global AI leaders. Over the most recent quarter, the cloud division grew 26% year-on-year last quarter, while AI-related revenue posted triple-digit growth for eight consecutive quarters. But with Alibaba’s stock already up 2x year-to-date, the real question is: can this AI-fueled rally continue, or is much of the good news already priced in?
Image by Markus Winkler from Pixabay
Beyond individual products, Alibaba is committing to a broader AI ecosystem. The company initially pledged RMB 380 billion (about $53 billion) for AI infrastructure and development over three years, but CEO Eddie Wu has confirmed that Alibaba will exceed this figure in response to surging demand and strong technological progress. At the same time, Alibaba is deepening ties. Its strategic partnership with Nvidia will integrate Nvidia’s advanced AI development tools into Alibaba Cloud’s AI platform. The partnership aims to accelerate development in “physical AI,” moving AI capabilities beyond computing into tangible applications such as humanoid robots and self-driving cars.
Yet for all the excitement, Alibaba’s surge has also made the stock far less of a bargain. Shares now trade at close to $180, or roughly 23x forward earnings – more than double the modest 10x multiple investors paid just about a year ago. And while AI revenues are exploding, the company’s overall growth picture looks less impressive: consensus forecasts call for just around 5% sales growth in 2025. By comparison, global peers like Alphabet are trading at only slightly higher valuations (roughly 25x forward earnings) yet are expected to grow revenue by more than 13% this year. The contrast underscores that while Alibaba’s AI push has reignited investor enthusiasm, sustaining the current momentum will ultimately depend on whether broader business growth can catch up with soaring expectations.
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