🐉 Alibaba (BABA): Is China's Fallen Tech Titan Becoming Interesting Again?

Alibaba Cloud Is Growing 45%—and Its Chairman and CEO Just Bought $25M+ of Stock

BABA remains far below its 2020 peak as AI accelerates, insiders buy, and a $10.2 billion capital raise tests the bull case.

BABA trades near 19x forward earnings and far below its 2020 peak—but the China discount exists for a reason.

Alibaba 

NYSE: BABA
$119.44
+0.97
(+0.82%)
As of Aug-25-2026 4:10:00 PM ET

Alibaba isn't exactly an undiscovered stock.

It's one of the largest technology companies on Earth, the owner of Taobao and Tmall, operator of Alibaba Cloud, parent of international platforms including AliExpress and Lazada, and an increasingly aggressive competitor in artificial intelligence.

Yet something unusual has happened.

While America's largest technology companies command enormous valuations, Alibaba remains roughly 63% below its October 2020 all-time high of $319.32.

Now its Cloud business is accelerating.

AI revenue is exploding.

Its chairman and CEO just bought more than $25 million of stock.

And the company is simultaneously asking shareholders to swallow billions in AI spending—and fresh dilution.

🐉 Welcome to Alibaba: where "cheap" and "complicated" apparently share an office.

⚡ Quick Take / TL;DR

The bull case: Alibaba combines a gigantic e-commerce ecosystem with rapidly accelerating Cloud and AI businesses. Cloud revenue grew 45% year over year, AI-related product revenue has posted triple-digit growth for 12 consecutive quarters, liquidity approaches $70 billion, valuation remains relatively modest, and Chairman Joe Tsai and CEO Eddie Wu just put more than $25 million of their own money into the shares.

The bear case: Alibaba's AI ambitions aren't free. Adjusted EBITA fell 30%, net income fell 75%, and free cash flow was negative RMB44.7 billion ($6.58B) as Cloud infrastructure spending surged. Meanwhile, Alibaba just raised approximately $10.2 billion through a discounted equity placement, diluting existing owners by roughly 3.6%.

FUNanc1al verdict: Compelling—but emphatically not risk-free.

⭐ FunStock Index™: 8.4 / 10

Not without risks, of course, but relatively inexpensive and one of the more interesting ways to diversify away from an expensive U.S. equity market.

And leadership is buying.

That's tough to ignore.

🧬 What Exactly Is Alibaba Today?

Calling Alibaba an "e-commerce company" increasingly feels like calling Amazon a bookstore.

Alibaba operates across several enormous ecosystems.

🛒 China E-Commerce: Taobao, Tmall, 1688, Xianyu and instant commerce.

🌎 International Commerce: AliExpress, Lazada, Trendyol, Daraz and Alibaba.com.

☁️ Cloud: Infrastructure-as-a-service, platform-as-a-service and increasingly model-as-a-service.

🤖 AI: Qwen models and a growing full-stack AI ecosystem spanning language, coding, video, audio, images and enterprise agents.

📍 Everything Else: Cainiao logistics, Amap navigation, Youku entertainment, Freshippo grocery retail and other businesses.

That breadth matters because today's Alibaba thesis isn't simply:

Will Chinese consumers buy more stuff online?

It's increasingly:

Can Alibaba convert its enormous installed commercial ecosystem into one of China's dominant AI and cloud platforms?

And the latest quarter provided some serious ammunition.

☁️ Trigger #1: Cloud Just Accelerated to 45%

Here's the number that deserves investors' attention:

Alibaba Cloud external revenue: +45% year over year.

More importantly, Alibaba reported its 12th consecutive quarter of triple-digit growth in AI-related product revenue.

That's no longer a one-quarter AI sugar rush.

CEO Eddie Wu says Alibaba's full-stack AI strategy now encompasses frontier language, coding, video, audio, image and music models, plus QwenWork, its enterprise AI workforce agent.

Meanwhile, Cloud's EBITA margin reached 12%, suggesting that at least some operating leverage is beginning to appear beneath all that spending.

🗣️ FUNanc1al Atomic Statement #1

"Alibaba's most important product may no longer be something delivered in a cardboard box. It's increasingly compute delivered from the cloud."

That doesn't mean Alibaba has become "China's AWS + OpenAI."

That's premature.

But it does mean investors valuing Alibaba purely as a mature Chinese e-commerce platform may increasingly be analyzing yesterday's company.

💸 Unfortunately, AI Has Discovered Alibaba's Wallet

Now comes the uncomfortable part.

AI infrastructure costs money.

A lot of it.

Alibaba has committed more than RMB380 billion—roughly $56.5 billion—to Cloud and AI infrastructure over three years.

During the June quarter:

• Revenue increased 9% to RMB268.95B ($39.64B).
• Operating income fell 57%.
• Adjusted EBITA fell 30% to RMB27.33B.
• Net income fell 75% to RMB10.44B.
• Non-GAAP diluted EPS declined 42% to $1.26 per ADS.
• Operating cash flow nevertheless increased 11% to $3.38B.
• Free cash flow deteriorated to a $6.58B outflow.

Why?

Cloud infrastructure spending was a major culprit.

And then came something existing shareholders generally don't enjoy:

Dilution.

Alibaba launched an approximately HK$80 billion ($10.2B) share placement, selling 710 million new shares to finance chips, infrastructure and AI models. The offering represented roughly 3.6% of Alibaba's enlarged share capital.

Investors weren't thrilled.

Understandably.

You don't normally celebrate when a company you've invested in prints several billion dollars' worth of new stock.

🐉 Apparently even a $70 billion piggy bank can occasionally ask shareholders to Venmo it another $10 billion.

But there's an intriguing counterpoint.

The offering reportedly attracted around $28 billion of orders and significant interest from long-only and sovereign investors.

So Alibaba's AI spending has become both:

the biggest reason to own BABA...

and

one of the biggest reasons not to.

That's what makes the stock interesting.

👉 Want the full picture? Dive into Alibaba (BABA)'s financials here.

👔 Trigger #2: Joe Tsai and Eddie Wu Put $25M+ Where Their Mouths Are

Then management did something that caught our attention.

They bought.

Not options.

Not stock awards.

Shares.

Following the equity placement and selloff, Chairman and co-founder Joseph Tsai bought 720,000 Hong Kong-listed ordinary shares on August 24 and another 720,000 on August 25.

CEO Eddie Wu bought another 350,000 ordinary shares.

Combined disclosed purchases:

Approximately HK$200 million / US$25.5+ million.

Reuters confirmed Tsai's second 720,000-share purchase at an average HK$113.47, bringing the combined Tsai/Wu purchases above HK$200 million.

And there's an important technical detail.

Alibaba's U.S.-listed security isn't one ordinary Hong Kong share.

Each NYSE BABA ADS represents eight Alibaba ordinary shares.

So don't look at Tsai's approximately HK$113 purchase price and compare it with BABA at $119 and conclude:

GOOD LORD! JOE TSAI JUST BOUGHT ALIBABA AT A 90% DISCOUNT!

He didn't.

Adjust for currency and Alibaba's 8:1 ordinary-share-to-ADS ratio, and the prices broadly reconcile.

Still...

$25 million is $25 million.

Tsai is Alibaba's co-founder and chairman.

Wu is its CEO.

They know precisely how much Alibaba intends to spend on AI.

They know its competitive position.

They know its internal Cloud economics.

They know what the equity raise means.

And immediately after investors punished the shares...

they bought.

🗣️ FUNanc1al Atomic Statement #2

"Insider buying doesn't eliminate investment risk. It eliminates one excuse: management can't easily claim conviction while keeping its own wallet closed."

The purchases don't prove Alibaba is undervalued.

But they're a meaningful alignment signal.

And there's potentially more.

Reuters reported that Chinese state-backed media said founder Jack Ma had increased his Alibaba holdings by more than HK$600 million. Because that figure was reported through unnamed sources rather than the same disclosed transaction trail we're using for Tsai and Wu, we'd treat it as supporting evidence rather than the cornerstone of the thesis.

That distinction matters.

FUNanc1al likes insider signals.

We like verified ones even more.

🏛️ Trigger #3: Wall Street Is Present—but Ownership Is Fragmented

Alibaba is hardly an institutional orphan.

Ownership data (Source: Yahoo Finance) identifies 1,791 institutions, including:

Primecap Management: 18.61M ADSs
UBS: 10.57M
Dodge & Cox: 9.96M
HSBC: 9.63M
Morgan Stanley: 7.42M
Goldman Sachs: 6.86M
Fisher Asset Management: 5.10M
Bank of America: 4.82M
Barclays: 4.68M

But unlike the old SoftBank era, ownership is fragmented.

That's neither inherently bullish nor bearish.

It simply means there isn't one giant strategic shareholder dominating the story.

Meanwhile, short interest sits at only 1.83%, with approximately 3.54 days to cover.

Translation:

The bears exist.

But this isn't exactly Wall Street assembling outside Alibaba headquarters carrying pitchforks.

For Alibaba (BABA)'s Institutional Ownership breakdown, 🔍 see here.

📊 Trigger #4: Is BABA Actually Cheap?

This requires nuance.

At $119.44, Alibaba approximately trades at:

Market cap: $275B
Forward P/E: 19.42x
Price/Sales: 1.84x
Price/Book: 1.82x
EV/Revenue: 1.66x
EV/EBITDA: 14.91x
Cash + liquid investments: ~$69.9B

For a business producing 45% Cloud growth, those aren't obviously extravagant multiples.

But here's where we need to avoid a seductive analytical shortcut.

Comparing Alibaba's forward P/E directly with the S&P 500's trailing P/E isn't apples-to-apples.

The broader point nevertheless survives:

U.S. equities are historically expensive, while Alibaba carries a substantial valuation discount.

And that discount isn't necessarily a mistake.

Investors demand compensation for:

🇨🇳 Chinese regulatory risk
🌎 U.S.-China geopolitical tensions
🛒 brutal domestic e-commerce competition
💸 enormous AI capital requirements
📉 uncertain returns on that capital
🏛️ different governance and jurisdictional risks

In other words:

The China discount exists for reasons.

But perhaps the more interesting question in 2026 is whether some exposure to that discount itself provides diversification from richly valued U.S. equities.

That's where Alibaba becomes particularly interesting.

🌎 Food for Thought: The Cross-Hub Connection

Diversification is usually described geographically:

Don't own only America.

But genuine diversification is deeper than geography.

It's diversification of valuation regimes, economic cycles, currencies, policy environments and investor expectations.

An American AI company trading at a gigantic multiple and a Chinese AI company trading under a geopolitical cloud may participate in the same technological revolution while exposing shareholders to very different risks.

That isn't automatically safer.

But it is different.

🗣️ FUNanc1al Atomic Statement #3

"Diversification isn't owning the same optimism in ten different tickers. It's owning assets whose risks aren't all priced by the same crowd."

And that may ultimately be BABA's most overlooked attraction.

Risks, Verdict, FAQ & Publication Footer

🐻 The Bear Case: Don't Let 45% Cloud Growth Hypnotize You

Alibaba has serious problems.

1. Profitability is moving the wrong way.

Revenue grew 9%.

Yet adjusted EBITA fell 30%.

Net income fell 75%.

Free cash flow reached negative $6.58 billion.

That isn't noise.

Alibaba is making an enormous wager that today's infrastructure spending creates tomorrow's AI cash machine.

It may.

It may not.

2. Shareholders just got diluted.

The $10.2 billion placement represented approximately 3.6% of enlarged share capital and was sold at a discount.

There's an uncomfortable irony here.

Alibaba has historically spent billions repurchasing shares...

and is now issuing shares to finance AI investment.

That doesn't automatically make the capital allocation wrong.

But shareholders should ask why equity financing was preferable despite Alibaba's substantial liquidity.

3. China's e-commerce market isn't Alibaba's private playground anymore.

PDD/Pinduoduo, JD.com, Douyin and other competitors have transformed the landscape.

Alibaba remains enormous.

But enormous and invulnerable are not synonyms.

Customer-management revenue actually declined 7% year over year in the June quarter, although Alibaba says it would have increased approximately 1% excluding the contra-revenue impact of a new business-development program.

That's hardly hypergrowth.

4. Geopolitics can overwhelm spreadsheets.

Alibaba can execute perfectly operationally and still suffer from:

• U.S.-China tensions
• regulatory intervention
• semiconductor restrictions
• foreign-investor risk aversion
• Chinese economic weakness
• changing capital-market rules

You can't solve geopolitical risk with an Excel model.

Which is precisely why BABA may remain "cheap" for much longer than bulls expect.

💡💡💡 Curious about another deep oil exploration play? (joke)
Check our takes on UnitedHealth Group or even Oscar Health.

⚖️ So What's the Actual Alibaba Thesis?

Forget the hype.

Alibaba doesn't need to become China's OpenAI.

It doesn't need to return to $319.

It doesn't even need the "China discount" to disappear.

The thesis is simpler.

If:

1. Alibaba's core commerce franchises remain durable,

2. Cloud continues producing strong double-digit growth,

3. AI products ultimately monetize enough to justify today's extraordinary investment,

4. Cloud margins continue improving,

5. management eventually converts infrastructure spending back into meaningful free cash flow,

then today's valuation could look quite reasonable.

And if several of those assumptions fail?

The China discount may turn out not to have been a discount at all.

It may have been the price of admission.

📌 Signal Extract

"Alibaba's most important product may no longer be something delivered in a cardboard box. It's increasingly compute delivered from the cloud."

— FUNanc1al

🎯 High-Conviction Takeaway

"Diversification isn't owning the same optimism in ten different tickers. It's owning assets whose risks aren't all priced by the same crowd."

— FUNanc1al

⭐ FunStock Index™ — 8.4 / 10

🐉 Compelling. Cheap-ish. Complicated.

➕ 45% Cloud external-revenue growth

➕ 12 consecutive quarters of triple-digit AI-related product growth

➕ ~$69.9B cash and liquid investments

➕ ~$25.5M disclosed buying from Chairman Joe Tsai + CEO Eddie Wu

➕ Valuation substantially below many U.S. technology leaders

➕ Potential portfolio diversification away from expensive U.S. equities

But...

➖ Negative $6.58B quarterly free cash flow

➖ 30% decline in adjusted EBITA

➖ 75% decline in net income

➖ $10.2B equity financing / ~3.6% dilution

➖ Ferocious Chinese e-commerce competition

➖ Permanent geopolitical/regulatory uncertainty

FUNanc1al Verdict

Alibaba earns an 8.4/10 because the risk/reward has become unusually interesting.

This isn't a "forget about it for 20 years" stock.

It requires monitoring.

But at roughly 19x forward earnings, with Cloud accelerating to 45%, nearly $70 billion of liquidity and Alibaba's chairman and CEO buying more than $25 million of shares after the market recoiled from its latest capital raise, there is enough evidence here to pay attention.

The crucial question isn't whether Alibaba has risks.

Of course it does.

The question is whether those risks are already reflected in the price.

At $119.44...

we increasingly suspect quite a few of them are.

FunStock Index™: 8.4 / 10.

🐉 Interesting enough to own carefully. Risky enough never to stop watching.

❓ FAQ

Is Alibaba stock cheap?

Relative to many large global technology companies, Alibaba's valuation at approximately 19.4x forward earnings, 1.84x sales and 1.82x book value, appears modest. But BABA's discount partly compensates investors for China-specific regulatory, geopolitical, governance and competitive risks.

How fast is Alibaba Cloud growing?

Alibaba reported 45% year-over-year growth in external Cloud revenue for the June 2026 quarter, while AI-related product revenue grew at triple-digit rates for the 12th consecutive quarter.

Did Alibaba insiders recently buy stock?

Yes. Chairman Joe Tsai and CEO Eddie Wu bought more than HK$200 million, or roughly US$25.5 million, of Hong Kong-listed Alibaba ordinary shares following the company's latest results and equity placement.

Why did Alibaba issue $10.2 billion of new stock?

Alibaba says the proceeds will finance its full-stack AI strategy, including AI chips, infrastructure and models. The 710 million-share placement represents roughly 3.6% of enlarged share capital.

Does one BABA ADS equal one Hong Kong share?

No. One NYSE-listed BABA ADS represents eight Alibaba ordinary shares. The securities are fungible, meaning they can be converted in either direction.

What's the biggest risk to the Alibaba thesis?

Probably capital returns.

Alibaba is spending enormous sums on AI. Cloud growth suggests genuine demand, but ultimately investors need that growth to produce sustainable profits and free cash flow. If tens of billions of dollars of infrastructure spending fail to generate attractive returns, today's apparently inexpensive valuation could prove deceptive.

Is BABA a way to diversify away from U.S. stocks?

Potentially—but diversification should not be confused with safety.

Alibaba provides exposure to a different geography, economy, valuation regime and technological ecosystem. Those differences can diversify a U.S.-heavy portfolio, but they introduce entirely different risks of their own.

👤 About the Author

Frédéric Marsanne is the founder of FUNanc1al—part market analyst, part storyteller, part accidental comedian. A longtime investor, entrepreneur, and venture-builder across tech, biotech, and fintech, he now blends rigorous financial analysis with a twist of humor to help readers laugh, learn, live healthier lives, and invest a little wiser.

His research focuses on insider buying, hedge funds, valuation, behavioral finance, long-term wealth creation, and the fascinating intersections between business, science, technology, health, passions, and everyday life.

When not decoding SEC filings or poking fun at earnings calls, he's building Cl1Q, writing fiction, painting, creating videos, or discovering new passions to FUNalize.

📝 Editorial Note

Every FUNanc1al article is grounded in human research, analysis, and editorial judgment. Modern AI tools may assist with research organization, editing, and presentation, but every opinion, conclusion, rating, and recommendation remains subject to human oversight and responsibility.

To learn more about how we research, write, and review every article, please visit our Editorial Process page.

At FUNanc1al, we focus on high-conviction ideas supported by multiple independent signals—not just headlines.

No single indicator guarantees investment success.

But when insider buying, improving fundamentals, strong cash generation, institutional sponsorship, and attractive valuations begin aligning...

we believe those opportunities deserve a closer look.

FUNanc1al's analysis combines company filings, financial statements, market data, institutional and insider disclosures, management commentary and independent editorial judgment.

Figures can change rapidly. Alibaba is particularly complicated because its ordinary shares trade in Hong Kong while its U.S.-listed ADSs trade on the NYSE; each BABA ADS represents eight ordinary Alibaba shares.

FUNanc1al therefore distinguishes between Hong Kong ordinary-share prices and U.S. ADS prices throughout this analysis.

Data and market price referenced as of August 25, 2026 unless otherwise noted.

At FUNanc1al, our objective is not to predict the future with certainty, but to encourage thoughtful analysis, healthy skepticism, long-term thinking, and a smile whenever possible.