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Bernstein Upgrades Alibaba Group Holding Limited (BABA) to ‘Outperform’ on AI Optimism and Growth Potential

We recently compiled a list of the 10 AI Stocks with Massive Growth Potential. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against the other AI stocks.

AI-darling Nvidia reported its earnings yesterday, and it’s safe to say that the numbers have been objectively great. Nevertheless, investor sentiment remains rather mixed, implying a “buy the rumor, sell the news” case.

Most of these concerns remain about sustaining the AI-driven market rally. The emergence of less power-hungry rivals such as DeepSeek also suggests uncertainty regarding the future demand for advanced chips.

READ ALSO: 10 Buzzing AI Stocks Dominating Headlines and 10 AI Stocks Gaining Momentum Right Now

Alongside, President Donald Trump noted that the 25% tariffs on Canada and Mexico are set to go into effect on March 4, adding that an additional 10% tax would be imposed on Chinese imports.

Investment firm UBS, without commenting on individual names, said that the earnings print reinforces their view that the broader AI market is big enough for every segment to grow, and that they remain positive on the AI compute industry as well as the broader AI trend. This is despite recent concerns around low-cost models like DeepSeek and recent noise around data centers, they stated.

“We maintain our positive view on AI semiconductors and leading cloud platforms, and recommend investors take advantage of elevated near-term volatility by buying the dip in quality AI stocks or through structured strategies.”

-UBS

Investors were skeptical ahead of the print considering how rival DeepSeek’s less power-hungry nature could imply an overspend by US tech giants on AI infrastructure without sufficient return in that investment. Nonetheless, AI players are continuing to announce plans to funnel tens of billions of dollars into infrastructure.

According to Wedbush analyst Dan Ives, $325 billion in capital expenditures is expected this year from just the “Magnificent Seven” tech companies. Moreover, a majority of this spend is aimed at supporting AI growth.

“We have seen NOT ONE AI enterprise deployment slow down or change due to the DeepSeek situation. No customer wants to ‘lose their place in line’ as it is described to us for Nvidias next gen chips.”

-Dan Ives

For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points  (see more details here).

An e-commerce platform displaying a wide range of products to customers online.

Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 107

Alibaba Group Holding Limited (NYSE:BABA) is an internet giant that offers e-commerce services in China and internationally. On February 25, Bernstein upgraded the stock to “Outperform” from Market Perform with a price target of $165, up from $104. The firm stated that it has “AI optimism and beyond” for the China e-commerce company.

“While last week felt like a local maximum for AI sentiment, the combination of more gainful capital allocation, a better industry structure for AI than legacy cloud, and possible spill-over effects of an AI capex boom in China makes us feel Alibaba’s earnings could now be on a more upwardly-pointing trajectory.”

Overall BABA ranks 8th on our list of the AI stocks with massive growth potential. While we acknowledge the 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 but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stock To Buy Now and Complete List of All AI Companies Under $2 Billion Market Cap.

Disclosure: None. This article is originally published at Insider Monkey.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

Dr. Inan Dogan

Dr. Ian Dogan

Co-Founder and Research Director at Insider Monkey

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide.

Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

How could anything be worth that much?

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates.

And this breakthrough has already set off a frenzy among hedge funds and Wall Street’s top investors.

What most investors don’t realize is that one under-owned company holds the key to this $250 trillion revolution.

In fact, Verge argues this company’s supercheap AI technology should concern rivals.

Before I reveal the details, let’s talk about how some of the richest people on the planet are positioning themselves.

  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

When billionaires from Silicon Valley to Wall Street line up behind the same idea — you know it’s worth paying attention to.

Even as we admire what Tesla, Nvidia, Alphabet, and Microsoft have built, we believe an even greater opportunity lies elsewhere…

But the real story isn’t Nvidia — it’s a much smaller company quietly improving the critical technology that makes this entire revolution possible.

And judging by what I’m hearing from both Silicon Valley insiders and Wall Street veterans…

This prediction might not be bold at all:

A few years from now, you’ll wish you’d owned this stock.

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Dr. Inan Dogan

Dr. Ian Dogan

Co-Founder and Research Director at Insider Monkey

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