Hold On to Alibaba Stock! There Is a Light at the End of the Tunnel.


  • Alibaba (BABA) is a strong player in the competition among Chinese artificial intelligence (AI) chatbots.
  • It’s a good sign that Jack Ma, Alibaba’s founder, envisions a positive future for the company.
  • Investors should consider buying and holding Alibaba stock.
Alibaba stock - Hold On to Alibaba Stock! There Is a Light at the End of the Tunnel.

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Jack Ma, the founder of Chinese e-commerce firm Alibaba (NYSE:BABA), isn’t the company’s decision maker anymore. Yet, Alibaba got a major shot in the arm when Ma released a memo to the company’s employees. Not only that, but Ma has skin in the game, financially speaking, and you should too, if you see the value in Alibaba stock.

Alibaba is making headway in China’s market for generative artificial intelligence. Sure, there’s room for Alibaba to grow and improve in that area. But then, the prospect of future growth is what makes BABA stock so compelling now.

Alibaba Stock: A Cheap Gen-AI Play

Some AI-related stocks are overpriced, but not Alibaba stock. Now, you might think Alibaba is only an e-commerce company, but Alibaba-backed Moonshot AI is gaining traction in China’s gen-AI chatbot market.

According to AIcpb.com (per The South China Morning Post), Moonshot AI’s Kimi gen-AI chatbot “saw total traffic to its website and app reach 12.6 million views in March.” That’s “more than quadruple” the figure from February.

Consequently, Kimi became China’s second-largest chatbot, replacing Alibaba’s own AI chatbot, Tongyi Qianwen, in that spot. In first place, by the way, is Baidu’s (NASDAQ:BIDU) Ernie Bot.

Even though Alibaba is a serious playing in China’s gen-AI chatbot war, the company’s shares aren’t overpriced at all. In fact, Alibaba’s GAAP trailing 12-month price-to-earnings ratio is 13.66x, versus the sector median P/E ratio of 17.29x.

Alibaba’s Founder Is Also an Investor

It’s certainly a good sign when a company’s founder is also a shareholder. Ma reportedly purchased $50 million worth of Alibaba stock in the fourth quarter of 2023, so clearly, he still believes in the company.

Ma is Alibaba’s largest single shareholder, and although he retired from the company in 2019, he’s evidently excited about Alibaba’s future prospects. Regarding Alibaba and AI, Ma remarked, “The AI era has just arrived. Everything has just begun, and we are in the moment!”

In an internal note to Alibaba’s employees, Ma expressed his optimism despite the company’s challenges and growing pains. “We are starting to operate on the diseases of a big company,” Ma observed.

Ma’s commentary comes at a time when Alibaba is in a transitional period. From re-shuffling managers to considering the sale of non-core assets, Alibaba is undergoing what Ma calls a “path of reform and innovation.”

Nonetheless, Ma encouraged Alibaba to “[a]dd oil” as the gears of change do their strenuous work in 2024. In the end, Ma’s confidence isn’t everything to Alibaba, but it’s certainly something.

Alibaba Stock: The Underpriced AI Investment You’re Missing Out On

Alibaba still has work to do if it wants to compete successfully in China’s gen-AI chatbot market. However, Alibaba’s low valuation suggests that the market doesn’t fully appreciate the company’s growth potential.

Meanwhile, Ma is putting his money where his mouth is as he’s a major Alibaba shareholder. So, if you’re a value seeker who likes to find hidden treasures in the market, go ahead and pick up some Alibaba stock.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/hold-on-to-alibaba-stock-there-is-a-light-at-the-end-of-the-tunnel/.

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