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Alibaba's tailwinds include strong generative AI demand and expansion beyond China.
Its key challenges include increasing competition and regulatory uncertainty in China.
Alibaba should be able to deliver robust growth over the next five years despite its challenges.
Alibaba Group Holding Ltd. (NYSE: BABA) is often referred to as the "Amazon (NASDAQ: AMZN) of China." The two companies' businesses are similar enough for the nickname to stick.
Over the last five years, however, Alibaba's stock performance has diverged significantly from that of its American counterpart. While Amazon's share price recovered from the bear market sell-off of 2022 and is now up more than 40% since late 2020, Alibaba's shares have declined by roughly 40%.
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That's water under the bridge now, though. Where will Alibaba stock be in five years?
You don't have to look hard to spot Alibaba's greatest tailwind. It's artificial intelligence, especially generative AI.
In the third quarter of 2025, Alibaba reported that AI-related product revenue soared by a triple-digit percentage year-over-year for the ninth consecutive quarter. Sales for the company's Cloud Intelligence Group unit jumped 34% year-over-year, with CEO Eddie Wu attributing the growth to "robust AI demand."
Alibaba Cloud ranks as the leader in China's AI cloud market with a market share of 35.8%. The company's full-stack approach to AI, providing infrastructure, large language models (LLMs), and internally developed chips, gives it a solid competitive advantage.
E-commerce remains a cash cow for Alibaba. The company's Alibaba.com, Tabao, and Tmall platforms are popular in China. Its Quick Commerce business, which provides super-fast delivery of groceries and essential daily products, is gaining momentum.
Alibaba is also expanding beyond China. Alibaba International Digital Commerce Group (AIDC) operates globally and has achieved particular success in Europe and the Middle East.
Like Amazon, Alibaba continually looks for new growth opportunities. A key focus for the company is the robotaxi market. Alibaba recently made a strategic investment in Hello's robotaxi business.
Image source: Getty Images.
Don't think that Alibaba has a cakewalk ahead of it, though. The company faces several significant challenges.
Increasing competition perhaps deserves a spot at the top of the list. PDD Holdings (NASDAQ: PDD), which operates the Pinduoduo and Temu e-commerce platforms, has escalated the price war in China. ByteDance's Douyin (the Chinese version of TikTok) has disrupted how younger people shop online.
Alibaba can't buy the most powerful GPUs made by Nvidia (NASDAQ: NVDA). This challenge has forced the company to invest more heavily in developing its own chips. It also increases the risk that Alibaba will be left behind in terms of technology.
Being based in China comes with a web of issues. Regulatory uncertainty is probably the most worrisome problem. Although the Chinese government is currently supportive of tech companies, the threat of a policy change always hovers over Alibaba like a dark cloud.
Another factor that Alibaba must manage is the steep cost of building AI data center infrastructure. The company's capital expenditures could squeeze earnings over the next few years.
Will Alibaba's tailwinds be sufficient to overcome its challenges through the end of the decade? I think so.
Despite intense competition, the company's e-commerce revenue continues to grow robustly. The restrictions on purchasing Nvidia's GPUs could prove to be a net positive for Alibaba over the long term. The Chinese government knows that for China to remain competitive in the AI race, companies like Alibaba must remain strong.
Most importantly, I expect that Alibaba's investments in AI infrastructure spending will yield significant returns. In particular, my hunch is that the adoption of agentic AI will generate tremendous growth for Alibaba Cloud.
Where does this leave Alibaba's stock in 2030? I predict that the Chinese internet giant's share price will soar by around 90% over the next five years to roughly $285. Alibaba's future should be brighter than its past.
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Keith Speights has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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