DeepSeek gave Alibaba Group Holding Limited (NYSE:BABA) and Alphabet Inc. (NASDAQ:GOOGL) a revealing price comparison on August 3. Artificial Analysis estimated that DeepSeek’s V4-Flash averaged just $0.03 to complete each test in its benchmark suite while scoring 50 on its Intelligence Index, matching Google’s Gemini 3.6 Flash.
Three cents is the average cost of completing each benchmark test, not a normal customer query, and the index combines nine coding, reasoning, and workplace tests. More capable models from Moonshot, OpenAI and Anthropic scored at least seven points higher. Still, V4-Flash costs $0.14 per million input tokens and $0.28 per million output tokens. That makes model intelligence cheap enough to pressure pricing for routine enterprise workloads.
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Alibaba has two ways to monetize that pressure. Alibaba Cloud’s AI Gateway already supports DeepSeek V4 APIs and can route workloads between DeepSeek and Qwen. Alibaba also unveiled its own 2.4-trillion-parameter Qwen3.8-Max on August 3, sending its Hong Kong shares up 7%. Its cloud revenue grew 38% in the March quarter, external cloud revenue rose 40%, and AI products reached 30% of external cloud sales. The catch is severe spending: group revenue rose only 3%, while Alibaba plans to exceed its earlier RMB380 billion three-year AI commitment and is treating margins as secondary.
What that creates is a demanding unit-economics test. Lower inference prices can pull customers into Alibaba Cloud, but revenue compounds only if workload volume grows faster than prices fall and those users also buy storage, networking and databases.
Alphabet has the stronger defense. Google Cloud revenue jumped 82% to $24.8 billion in Q2 2026, and operating margin expanded to 35.6%. That is evidence that customers still pay for distribution, infrastructure, and integrated products even when standalone models become cheaper. Insider Monkey’s database showed 222 hedge funds holding Alphabet Inc. (NASDAQ:GOOGL) at the end of Q1 2026, up from 214 in Q4 2025.
Alibaba’s July 15 short interest was 42.14 million shares, 2.01% of float, with 2.8 days to cover. That modest skepticism might be representing the gap between cloud growth and companywide profit conversion. The investment conclusion is clean: Alibaba Group Holding Limited (NYSE:BABA) offers the more speculative upside if cheap models win workloads, but Alphabet remains the better risk-adjusted holding because it has already turned AI demand into high-margin cloud growth. DeepSeek attacks model pricing, not Google’s entire moat.
While we acknowledge the risk and potential of BABA and GOOGL as investments, 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 GOOGL and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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