Alibaba Group Holding Limited (BABA): A Bull Case Theory

We came across a bullish thesis on Alibaba Group Holding Limited on Valueinvesting subreddit by Illustrious_Lie_954. In this article, we will summarize the bulls’ thesis on BABA. Alibaba Group Holding Limited's share was trading at $175.66 as of January 28th. BABA’s trailing and forward P/E were 22.96 and 19.19 respectively according to Yahoo Finance.

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. BABA delivered a stronger-than-expected second quarter, helping shift sentiment around the stock as revenue reached 247.8 billion yuan (approximately $34.8 billion), comfortably ahead of expectations of 242.6 billion yuan and representing roughly 5% year-over-year growth.

The market reacted positively, with shares rising about 4% in premarket trading, reflecting relief that operating trends are stabilizing amid a challenging backdrop for Chinese technology companies. While headline revenue growth remains modest, the real focus of the quarter was Alibaba’s cloud division, which is increasingly central to the company’s long-term investment narrative due to its exposure to artificial intelligence workloads and enterprise digital transformation.

Cloud revenue accelerated sharply, growing 34% year over year to 39.8 billion yuan, materially exceeding expectations and marking a meaningful step up from the prior quarter’s 26% growth rate. Management attributed this acceleration primarily to sustained AI-related investments, including higher demand for AI computing, model training, and enterprise solutions, suggesting that Alibaba is beginning to see tangible returns from years of heavy spending in cloud infrastructure and AI capabilities. This performance is particularly notable given the persistently weak sentiment surrounding Chinese tech, where concerns around regulation, macro conditions, and competition have weighed on valuations and investor confidence.

Against that backdrop, the reacceleration in cloud growth provides evidence that Alibaba’s most strategic business is regaining momentum and could serve as a stabilizing force for the broader company. While one quarter does not resolve all structural concerns, the combination of an earnings beat, improving cloud fundamentals, and visible AI-driven demand strengthens the case that Alibaba’s cloud segment may once again become a key driver of growth, valuation support, and investor re-rating if execution continues to improve.

Previously, we covered a bullish thesis on Alibaba Group Holding Limited (BABA) by Kontra Investments in March 2025, which highlighted the strength of Taobao Tmall monetization, disciplined cost control, and long-term AI-driven cloud optionality. BABA’s stock price has appreciated by approximately 29.98% since our coverage due to improving earnings sentiment and renewed confidence in cloud execution. Illustrious_Lie_954 shares a similar view but emphasizes near-term cloud growth acceleration and AI-driven demand visibility.

Alibaba Group Holding Limited is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 130 hedge fund portfolios held BABA at the end of the third quarter which was 101 in the previous quarter. While we acknowledge the risk and potential of BABA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BABA and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.