Baidu vs. Alibaba: Which Chinese Tech Stock Has More Upside?

The Chinese tech sector remains a focal point for global investors, with Baidu and Alibaba representing two of the most prominent players in the AI and cloud computing space. As artificial intelligence reshapes industries and cloud infrastructure becomes a cornerstone of digital transformation, the question of which stock offers greater upside hinges on their strategic execution, market positioning, and financial discipline.

Alibaba: Ecosystem-Driven AI and Cloud Dominance

Alibaba Cloud has cemented its leadership in China's cloud market, holding the top spot with a 34% year-over-year revenue increase in the September quarter of 2025, reaching RMB 39.8 billion ($5.6 billion). This growth is fueled by triple-digit expansion in AI-related products, including generative AI tools and large model hosting services. Alibaba's broader ecosystem-spanning e-commerce, logistics, and fintech-provides a unique advantage. For instance, its Qwen app, an AI-powered assistant, achieved 10 million downloads in its first week, showcasing the company's ability to integrate AI into consumer and enterprise workflows.

Alibaba's aggressive capital expenditures further underscore its commitment to AI and cloud infrastructure. Over the past four quarters, the company allocated RMB 120 billion to advance its strategic priorities, including expanding data centers and refining its AI models. While this has temporarily impacted profitability, Alibaba's long-term vision is clear: to leverage its consumption platform to drive AI adoption. As stated by the company, its "Cloud Intelligence" segment is expected to account for a growing share of both revenue and EBITA in 2026.

However, challenges persist. Despite triple-digit AI workload growth in 2025, the company's cloud segment still faces pressure to improve operating leverage. Additionally, its e-commerce division relies heavily on promotional spending to maintain stability, raising questions about long-term efficiency.

Baidu: AI-First Strategy and Cost Efficiency

Baidu has positioned itself as an AI-first company, with its AI Cloud business growing 27% year-over-year in 2024 to RMB 6.5 billion. This growth is driven by enterprise demand for model hosting, inference, and subscriptions, supported by Baidu's four-layer AI architecture, which has reduced inference costs through improved resource utilization. The company's focus on localized AI solutions-such as its Kunlun AI chips-has also attracted domestic clients, with GPU-based cloud subscriptions surging 128% year-on-year in Q3 2025.

Looking ahead, Baidu's cloud revenue is projected to surge by 61% in 2026, according to JPMorgan, as demand for AI computing capacity intensifies. This optimism is rooted in Baidu's ability to innovate at lower costs compared to global peers. For example, its in-house Kunlun chips reduce dependency on foreign suppliers, a critical advantage in the current geopolitical climate.

Yet, Baidu's market share in China's cloud computing sector remains third, trailing behind Alibaba and Tencent. While it holds 25% of the AI cloud market, its global ambitions are less pronounced than Alibaba's. This could limit its scalability in international markets, where Alibaba Cloud already ranks fourth with a 4% global market share.

Market Dynamics and Future Projections

China's AI cloud market is expanding rapidly, surging 55% in 2024 to 19.6 billion yuan, driven by generative AI adoption. Both Baidu and Alibaba are well-positioned to benefit, but their strategies diverge. Alibaba's ecosystem-centric approach allows it to cross-subsidize AI and cloud investments, while Baidu's cost-efficient, AI-first model targets niche enterprise needs.

From a financial perspective, Alibaba's 2025 results highlight its resilience: total revenue rose 5% year-over-year to RMB 247.8 billion ($34.8 billion), with its e-commerce division growing 16%. Baidu, meanwhile, has yet to release 2025 financials but is expected to report strong cloud growth, given its 2024 momentum.

Investment Implications

For investors, the choice between Baidu and Alibaba depends on risk tolerance and time horizon. Alibaba's broader ecosystem and global cloud presence offer stability, but its path to profitability requires careful monitoring. Baidu's focused AI strategy and cost advantages could deliver higher growth, albeit with greater execution risk.

JPMorgan's upgrade of Baidu to "Overweight" underscores confidence in its AI and cloud potential, while analysts caution that Alibaba must prove its AI-driven cloud growth can improve margins. Given Alibaba's current market leadership, diversified revenue streams, and strategic investments, it may present a more balanced opportunity for long-term investors. However, Baidu's agility and localized AI solutions could outperform in a market increasingly prioritizing domestic innovation.

Conclusion

Both Baidu and Alibaba are pivotal to China's AI and cloud revolution, but their trajectories differ. Alibaba's ecosystem-driven model and global ambitions provide a broader foundation, while Baidu's AI-first approach offers sharper growth potential. For now, Alibaba's ability to scale and monetize its AI and cloud offerings-despite near-term profitability challenges-suggests it may hold more upside for investors seeking a blend of growth and stability.