Eastern ascent: Should you buy Alibaba on momentum or is Baidu a safer Chinese AI play?

**Alibaba (BABA) and Baidu (BIDU) present distinct investment propositions within China's tech landscape.** While Alibaba's diversified model and strong institutional backing make it a solid long-term choice, Baidu's focus on AI and cloud services offers high-risk, high-reward potential. Investors should align their strategy with their risk tolerance and investment horizon. 1. **Alibaba (BABA): Structural Strength and Valuation Opportunity** - **Business Model**: Alibaba’s ecosystem—encompassing e-commerce (Taobao, Tmall), cloud services (阿里云), and digital media (Kuaishou, Bilibili)—provides a robust moat against competitors. - **Technical Indicators**: The stock trades below its 120-Day, 200-Day, and 250-Day moving averages (Rs. 122.09, Rs. 109.7, and Rs. 105.71 respectively), indicating a bearish trend. However, the 5-Day, 10-Day, and 20-Day moving averages are above the current price, suggesting short-term price pressure. - **MACD and RSI**: The MACD is positive (0.49) but the RSI is neutral (43.67), reflecting recent volatility rather than strong momentum. - **Market Sentiment**: Jefferies and analysts highlight a compelling long-term growth case, with upside potential driven by AI cloud services and instant commerce. The stock offers a rare opportunity at a discount to peers, with an average 12-month price target of Rs. 159.67, implying a 45% upside. |code|Ticker|Name|Date|Closing Price|market_code| |---|---|---|---|---|---| |BABA|BABA.N|Alibaba Group|20240802|77.45|169| |BIDU|BIDU.O|Baidu|20240802|84.49|185| |BABA|BABA.N|Alibaba Group|20240805|76.98|169| |BIDU|BIDU.O|Baidu|20240805|82.39|185| |BABA|BABA.N|Alibaba Group|20240806|77.9|169| |BIDU|BIDU.O|Baidu|20240806|83.01|185| |BABA|BABA.N|Alibaba Group|20240807|77.83|169| |BIDU|BIDU.O|Baidu|20240807|82.01|185| |BABA|BABA.N|Alibaba Group|20240808|80.31|169| |BIDU|BIDU.O|Baidu|20240808|86.54|185| |code|Ticker|Name|Date|Moving Average|market_code| |---|---|---|---|---|---| |BABA|BABA.N|Alibaba Group|20250801|119.3180|169| |BIDU|BIDU.O|Baidu|20250801|87.2280|185| |code|Ticker|Name|Date|RSI|KDJ|MACD|market_code| |---|---|---|---|---|---|---|---| |BABA|BABA.N|Alibaba Group|20250801|43.6653|5.4949|0.4864|169| |BIDU|BIDU.O|Baidu|20250801|37.9383|-1.8618|-0.9322|185| 2. **Baidu (BIDU): AI-Powered Growth and Valuation Challenges** - **Business Model**: Baidu’s core search and advertising business faces headwinds, but its AI Cloud and autonomous driving segments show promise. - **Technical Indicators**: Similar to Alibaba, Baidu’s stock trades below its 120-Day, 200-Day, and 250-Day moving averages (Rs. 88.67, Rs. 88.19, and Rs. 88.7 respectively), indicative of a bearish trend. The 5-Day, 10-Day, and 20-Day moving averages are below the current price, suggesting short-term downward pressure. - **MACD and RSI**: The MACD is negative (-0.93) and the RSI is low (37.94), indicating weak momentum and potential overselling. - **Market Sentiment**: Baidu’s stock has dropped nearly 75% from its all-time high, despite growing AI and cloud revenues. The stock is trading at a discount, but its valuation is supported by its AI-driven cloud services. 3. **Risk and Opportunity Assessment** - **Alibaba**: Offers structural stability and a compelling valuation opportunity, supported by its diversified business model and strong institutional backing. - **Baidu**: Presents a high-risk, high-reward scenario, with significant growth potential in AI and cloud services, but also carries the risk of slower monetization and volatile performance. **Conclusion**: For investors seeking stability and long-term growth, Alibaba’s safer bet with its diversified model and improving macro environment. However, those willing to take on higher risk for the potential of outsized AI cloud and autonomous driving gains may find Baidu an attractive option. Ultimately, the choice depends on individual risk tolerance and investment strategy.