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Ark Invest bought shares of Alibaba, Pony AI, and Baidu on Monday.
Alibaba and Baidu are trading at forward earnings multiples in the teens.
Pony AI isn't cheap given its lack of profitability and its early stage of revenue growth, but it has some unique advantages in autonomous driving.
The rallying market has iconic growth investor Cathie Wood in a buying mood. The Ark Invest founder, CEO, and ace stock picker was making moves on the first trading day of the week. She bought only five different stocks on Monday, but one thing that three of them had in common is that they're Chinese companies.
Wood added to her existing positions in Alibaba (NYSE: BABA), Pony AI (NASDAQ: PONY), and Baidu (NASDAQ: BIDU) on Monday. All three companies are trying to carve out a role in the world's second largest economy. Let's take a closer look at the Wood's three fresh purchases that are hoping to score big in China.
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China's e-commerce pioneer is rolling in 2025. The stock has nearly doubled, surging 95% this year. But if you're expecting a textbook case of a market beater, you'll probably walk away disappointed.
Alibaba isn't posting stellar growth. Revenue is rising at a single-digit clip for the fourth year in a row. The bottom-line story isn't necessarily any better, with Alibaba falling short of Wall Street profit targets in back-to-back quarters this year. However, with Chinese stocks depressed heading into this year on trade war concerns, Alibaba was trading at a forward earnings multiple in the single digits at the start of this year.
Image source: Getty Images.
Alibaba's model works. It has two e-commerce workhorses in China. Taobao is the country's leading consumer-to-consumer marketplace. Tmall is Alibaba's business-to-consumer play. These are cash cows, generating 45% of Alibaba's consolidated revenue but also 113% of its consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
You read that right. The profitability of its domestic e-commerce business, cranking out an adjusted EBITDA margin of 44% in its latest quarter, is enough to finance the losses for the other 55% of its business. Whether it's the AliExpress segment that sells Chinese-sourced goods all over the world or a percolating cloud business, Alibaba is making well-placed bets on future workhorses.
Alibaba has enough spare money to return money to its shareholders. Its cash-rich balance sheet affords it the flexibility to pay a small dividend, but it has also pulled off share buybacks in each of the past four quarters. With the shares trading for a reasonable 16 times next fiscal year's projected earnings, this good story can get even better if some of its side bets start to pay off.
It's been just 10 months since Pony AI went public at $13 a share. It's a successful offering -- now. The provider of autonomous driving tech that leans on artificial intelligence (AI) has been a wild ride for investors. Pony AI saw its shares top $23 in February, before plunging as low as $4.11 just two months later. It has since nearly made all of that back with a better-than-fivefold jump. The stock is now beating the market with a 58% gain since its IPO as of Monday's close.
Pony AI has been faring well in the commercialization of robotaxis in China, standing out in a sea of self-driving-car stocks. It's the only participant at the World Artificial Intelligence Conference 2025 in Shanghai to offer fully driverless and on-demand ride-hailing services. It's also the only participant that's able to operate in extreme weather conditions.
Revenue rose 76% in its latest quarter to the U.S. equivalent of $21.5 million, fueled by the more than doubling of robotaxi revenue. Its robotaxi fare-charging revenue more than quadrupled, admittedly off a small base a year ago. Pony AI expects to hit 1,000 vehicles in its fleet by the end of this year. It's making inroads outside China. Earlier this month it announced plans to offer its services in Qatar. The profitless Pony AI will have to grow into its beefy $7.3 billion market cap, but it's certainly steering -- not necessarily autonomously -- in the right direction.
Finally we have Baidu. It's been a late bloomer in this potent year for Chinese growth stocks. Three months ago it was trading roughly where it was when 2025 started, but it has gone on to soar more than 60% since then.
The growing pains for China's leading search engine operator have been even worse than Alibaba. Revenue has declined in two of the past three years, and Baidu's top line has inched lower through the first half of 2025. The catalyst for Baidu's emergence this summer has come from its fledgling AI chips business. Trading restrictions with China find the country turning to homegrown players, and Baidu happens to finally be in the right place at the right time.
Despite the recent rally, Baidu is trading for just 12 times trailing earnings. Analysts see a return to revenue and adjusted earnings growth next year. This is a good price for a company that has been great before, and it might be close to getting there again.
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Rick Munarriz has positions in Alibaba Group. The Motley Fool has positions in and recommends Baidu. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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