Analyst on Alibaba’s (BABA) AI Race With US Companies: ‘It’s Going to be Tough For Them’

We recently published 10 Stocks to Watch Ahead of Q3 Earnings Season. Alibaba Group Holding Limited (NYSE:BABA) is one of the stocks that Wall Street analysts are discussing these days.

Cory Johnson from Epistrophy Capital said in a recent program on Schwab Network that Alibaba Group Holding Ltd – ADR (NYSE:BABA) stock surge following its latest announcement to boost AI spending was “amazing.” However, the analyst believes competing with US companies in the AI race won’t be easy for the Chinese tech giant.

“It’s pretty amazing that a company announces they’re going to spend $53 billion and a stock goes up. Costs go up and the stock goes up. I think it shows the excitement of the notion of Alibaba joining in the AI parade here. But it will do so with significant constraints. Alibaba Group Holding Ltd – ADR (NYSE:BABA) does not have the same tools available to it that the big companies in the US that are going into AI and such with such great guns and with even bigger guns, Microsoft, Amazon.com, uh Google, also with with much bigger spending plans around AI and building out AI data centers. But you know to think about what Alibaba is, it’s an interesting combination of lots of different kind of US companies. I think we have to think of here as kind of the Amazon Web Services model that is part of Alibaba now and the notion that they’ll be building out data centers all over the world. But it’s going to be tough for them because they don’t have the chips that everyone else has access to.”

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Conventum – Alluvium Global Fund stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its second quarter 2025 investor letter:

“Alibaba Group Holding Limited (NYSE:BABA) was down 12.8%. Bear in mind, this comes off a stunning 55.3% March quarter return. Alibaba reported full year results, and by all accounts they were pretty good. Market chatter suggests some were disappointed by the Cloud revenue, but with 18% growth over the last year, we are not complaining. We liked the continuation of share buybacks, noting that for the year ended 31 March 2025, it bought back over 5% of its shares. Our Alibaba holding accounts for 3.3% of the Fund. We wrote last quarter that we were closely monitoring the position (hinting toward selling). We chose not to act, largely because we see it as one of the cheaper and most direct ways for the Fund to benefit from AI initiatives and Cloud infrastructure growth, and at the same time it provides geographic and economic diversity.”

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. This article is originally published at Insider Monkey.