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Alibaba's AI Play: A Golden Opportunity in China's Digital Economy

Wesley ParkTuesday, May 20, 2025 1:56 pm ET

8min read

The tech world is in a race to harness artificial intelligence (AI), and Alibaba (NYSE:BABA) isn’t just playing catch-up—it’s sprinting ahead with a $56 billion bet on AI and cloud infrastructure. This isn’t just a strategic move; it’s a full-blown offensive to dominate the next era of the digital economy. Investors, take note: this is a stock primed to explode once AI monetization kicks into high gear. Let’s dive in.

The $175 Target: Susquehanna’s Bold Call for a Stock That’s Already on Fire
Susquehanna’s $175 price target isn’t just a number—it’s a ringing endorsement of Alibaba’s potential. As of May 2025, the firm reaffirmed its “Positive” rating, arguing that the stock is undervalued despite a slight revenue miss in its latest quarter. Here’s why: Alibaba’s core commerce and cloud segments are growing at 12% and accelerating, respectively, while its AI investments are laying the groundwork for a future where data-driven efficiencies could redefine its entire ecosystem.

The broader analyst community backs this play. The average 12-month target is $164, but Susquehanna’s $175 sits comfortably in the mid-range of a consensus that’s overwhelmingly bullish. Morgan Stanley and Barclays are even more aggressive, pricing in $180—a 46% upside from today’s $123 price. shows a 45% surge, proving the market is already betting on this story.

Why the $56 Billion AI Investment Is a Game-Changer
Alibaba isn’t dabbling in AI—it’s making a decade-long commitment to dominate China’s tech landscape. The $56 billion investment from 2025 to 2028 isn’t just about R&D it’s about building an AI-powered engine for its e-commerce, logistics, and cloud divisions. Picture this: AI optimizing supply chains in real time, personalizing recommendations for 1 billion+ users, and revolutionizing cloud services for businesses. This isn’t hypothetical—it’s already happening.

Take its cloud division, which grew thanks to rising AI service demand, or its food delivery app ele.me, which is partnering with TTG to boost user engagement via AI-driven recommendations. Even its logistics arm ZTO Express, now with an Alibaba-linked board member, is leveraging data to cut costs and speed up deliveries. This is a fully integrated ecosystem, and AI is the glue holding it all together.

Valuation: A Bargain in Disguise
At a P/E of just 16.66, Alibaba trades at a steal compared to its growth trajectory. Susquehanna’s sum-of-the-parts valuation—a method that adds up the value of each business segment—backs this up. Even with a slight dip in 2026 earnings forecasts, the firm sees long-term upside because AI isn’t a cost center; it’s a profit driver.

The market’s 45% YTD gain is a clear vote of confidence, but the stock still hasn’t fully priced in the AI upside. With a $280 billion market cap, Alibaba is the king of Chinese e-commerce, but its AI moat could make it the Amazon of the East—only smarter, faster, and cheaper.

Risks? Sure. Manageable? Absolutely.
Critics will cite regulatory risks, execution hurdles, and reliance on China’s economy. Fair points, but here’s why they’re overblown:
- Regulation: Alibaba’s Financial Health Score of “GOOD” and strong cash flow mean it can navigate rules without breaking stride.
- Execution: The company’s track record—building Taobao, dominating cloud in China, and now leading in AI—proves it can scale big ideas.
- Economy: China’s shift to a consumption-driven model plays right into Alibaba’s strengths.

Action Stations: Buy Now—Before the AI Boom Hits
This isn’t a “wait-and-see” stock. Alibaba’s ecosystem, valuation, and analyst support create a once-in-a-decade opportunity. The $175 target isn’t a ceiling—it’s a starting line. With a 33% upside to the average target and catalysts like AI monetization just around the corner, this is a must-buy for growth investors.

Don’t let fear of volatility hold you back. Alibaba’s AI investments are too strategic, its ecosystem too dominant, and its stock too cheap to ignore. The future of tech is AI-driven—and Alibaba’s future is now.

Bottom line: This isn’t a gamble. It’s a bet on the future of China’s digital economy, and Alibaba is leading the charge. Act now before the market catches up.

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