Should You Buy Alibaba ETFs as Stock Surges on AI Investment Push?

Alibaba BABA shares surged to their highest price in nearly four years after unveiling renewed plans to boost artificial intelligence (AI) spending beyond its original $50 billion-plus commitment, per a Bloomberg article, as quoted on Yahoo Finance. Chief Executive Officer Eddie Wu forecasted that global AI investment could grow to roughly $4 trillion over the next five years, and Alibaba seeks to keep pace with that momentum, the Bloomberg article noted.

The very Bloomberg article added that the Alibaba CEO confirmed the company will expand on its February announcement to spend more than 380 billion yuan ($53 billion) over three years on AI model development and infrastructure. Alibaba plans to roll out its Qwen series of AI models and build “full-stack” AI capabilities, tapping both services and foundational infrastructure such as chips, the Bloomberg article pointed out.

Inside BABA’s Stock Performance & Valuation

Alibaba stock surged as much as 9% in the pre-market U.S. trading on Sept. 24, 2025. BABA stock has skyrocketed 92% so far this year (as of Sept. 23, 2025). Over the past month, BABA shares have gained about 31.2%. From a valuation standpoint, BABA stock is currently trading at a forward 12-month Price/Earnings ratio of 17.82X compared with the Zacks Internet – Commerce industry’s 25.54X (as of Sept. 17, 2025).

Growth Lagging Industry?

Alibaba’s earnings growth is expected to fall 10.2% this year compared with the underlying industry’s expected growth rate of 13.50% and the S&P 500’s expected growth rate of 15.96%. However, the company is expected to make a turnaround next year, with a projected growth rate of 32.63% versus the industry rate of 27.60%.

Again, if we consider the upcoming five-year period, the growth rate lags the Zacks Internet-Commerce industry. Alibaba’s expected growth rate for the next five years is 11% versus the industry figure of 20.40%.

Note that Alibaba is shifting its focus toward becoming an AI company instead of an e-Commerce company, its previous identity. This is something even U.S. e-Commerce and cloud behemoth Amazon AMZN is also doing. But then, Amazon’s expected growth rate is 22.20% over the next five years, despite coming from the same Zacks Internet – Commerce industry.

Meanwhile, the AI biggie NVIDIA is expected to grow by 32.80% over the next five years. Cloud provider Microsoft MSFT is expected to grow by 14.9% and another cloud bellwether Alphabet GOOGL is likely to expand by 14.90% over the same timeframe.

Bottom Line

The margin pressure is likely to be a concern for Alibaba. Price cuts for its AI infrastructure for user acquisition (as quoted on CNBC) may be causing margin pressure at the current level. Competition is intense in China as most players have launched their own large language models in recent months, the same CNBC article noted.

While Alibaba’s cloud growth displays a strong performance, its U.S. competitors maintain solid global cloud market share. Amazon, Google Cloud and Microsoft — combined — have 63% share of the global enterprise cloud infrastructure services market in Q2 of 2025, per data from IT market firm Synergy Research Group, as quoted on crn.com. The same CRN article indicated that Alibaba has continued to grab around 4% of the global cloud market in recent quarters. 

So, while Alibaba’s growth initiatives are commendable, it is intriguing to bet on the stock with the ETF approach to minimize company-specific concentration risks. Alibaba-heavy ETFs include ProShares Online Retail ETF ONLN, MicroSectors FANG+ ETN FNGS, Invesco Golden Dragon China ETF PGJ and Nightview Fund NITE NITE.

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This article originally published on Zacks Investment Research (zacks.com).

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