If you're keeping tabs on the tech giants reshaping the world, $Alibaba(BABA)$ just dropped some game-changing news at its 2025 Apsara Conference. As someone who's been tracking Chinese e-commerce and cloud plays for years, I see this as a pivotal moment. The company is ramping up its bets on artificial superintelligence (ASI), and it's got me convinced that BABA remains a solid buy. Let me break it down for you—starting with the big picture, then diving into the upgrades, growth drivers, and numbers. I'll wrap up with potential pitfalls, but spoiler: the upside looks compelling. $BABA-W(09988)$
The Big Bet on ASI: Alibaba's Vision for the Future
Let's kick off with the conference highlights. Alibaba Cloud's annual flagship event showcased the firm's aggressive pivot toward advanced AI. CEO Eddie Wu kicked things off by signaling boosted spending on smart tech and cloud infrastructure—surpassing the original three-year capex target of over 380 billion yuan. This move positions Alibaba to dominate in the emerging ASI landscape, where super-smart systems could redefine computing.
Management envisions large language models evolving into core operating frameworks, with AI-driven clouds acting as the new computing backbone. They predict a consolidated global market with just a handful—maybe five or six—major players. Alibaba aims to lead as a comprehensive provider of top-tier models, worldwide networks for intelligent computing, and a welcoming hub for developers. This isn't just hype; it's a strategic shift from e-commerce roots to a full-spectrum AI powerhouse.
Key Upgrades: Models, Tools, and Infrastructure
What really caught my eye were the tangible advancements unveiled. On the modeling front, Alibaba rolled out its most powerful large language model yet, Qwen3-Max, with an instruction-tuned variant that reportedly outpaces even GPT-5-Chat in benchmarks. They also enhanced vision-language capabilities in Qwen3-VL, boosted coding efficiency with Qwen-Coder, and refined multimodal series like the Wan visual family and Fun audio lineup.
To support creators, the firm launched Bailian, a cloud-based agent studio drawing from over 300 open-source AI tools. This offers comprehensive assistance for building and refining intelligent agents. Infrastructure got a major lift too: think high-capacity Panjiu servers, upgraded HPN8.0 networking, AI-optimized CPFS storage, and expanded features in the Lingjun cluster for training, inference, and reinforcement learning acceleration.
These aren't isolated tweaks—they form a cohesive ecosystem. By blending open-source innovation with robust hardware, Alibaba is making it easier for businesses to adopt AI, which could accelerate user growth and monetization.
Growth Drivers: Cloud Surge and E-Commerce Stability
Shifting to commercialization, the cloud segment screams opportunity. Fueled by native AI demand, overseas push, and increasing uptake in legacy sectors, Alibaba expects significant revenue lift. Sectors like electric vehicles, banking, and embodied AI (think robotics) are primed for rapid scaling thanks to the company's integrated cloud-AI offerings. Analysts project cloud revenues compounding at more than 30% annually over the next three years—a hefty driver for overall performance.
Don't sleep on the e-commerce side either. While AI takes center stage, core online retail remains resilient, contributing to a balanced outlook. In China's AI cloud space, Alibaba holds a commanding 36% share per Omdia data from the first half of 2025, outstripping rivals like Volcano Engine (15%) and Huawei (13%). This leadership reinforces its moat in a high-growth arena.
Crunching the Numbers: Valuation and Projections
From a valuation standpoint, things look attractive.
Using a sum-of-the-parts approach grounded in discounted cash flows, the target price has been hiked to $195 per ADR (or HK$190 per share). This factors in $170 from core operations (including net cash and liquids), $14 from investments in listed and unlisted assets, and $11 from its Ant Group stake (valued at $78.5 billion based on recent buybacks). The discount rate holds at 11%, with a 3% perpetual growth assumption.
Earnings estimates got a slight bump too: FY26-28 earnings per ADS rose by up to 4%, landing at around $5.45, $7.24, and $9.54 in CNY terms for those years. Consensus visible alpha EPS sits at $6.18, $7.72, and $9.42 respectively—showing room for upside. Multiples are reasonable: forward P/E around 22x for FY25, dropping to 15x by FY28, with EV/EBITDA compressing from 15x to 8x. Free cash flow yields improve from 2.8% to nearly 7% over the period, supporting buybacks and dividends (yielding about 1.2%).
Company-wide, revenues are forecasted to climb from 996 billion yuan in FY25 to 1.38 trillion by FY28, with adjusted net income jumping from 130 billion to 174 billion yuan. Operating margins expand from 14% to over 14%, and ROE hits 13% by FY28. Balance sheet stays healthy, with net debt turning positive and cash flows funding investments.
Risks to Watch: Not All Smooth Sailing
Of course, no stock is risk-free. Macro slowdowns could dent consumer spending, while hefty outlays on global expansion or emerging tech might not pay off immediately. Regulatory hurdles loom large—think data privacy, antitrust scrutiny, U.S. trade tensions, or PCAOB audits. Competition heats up from short-video apps, social platforms, and AI newcomers. Broader issues like economic shifts, health crises, or geopolitical flare-ups could disrupt. Plus, any management instability might muddy execution.
Downside scenarios peg the stock at lower valuations if these materialize, but the base case assumes steady navigation.
Wrapping Up: Time to Buy BABA?
In my view, Alibaba's ASI commitment isn't just a conference buzz—it's a catalyst for sustained growth. With cloud poised for explosive expansion and e-commerce providing stability, the raised $195 target feels achievable, offering about 20% upside from current levels around $163. If you're hunting for exposure to AI in emerging markets without overpaying, BABA deserves a spot in your portfolio. I'm reiterating a buy rating here; the fundamentals align for long-term wins.
What do you think? Is Alibaba's AI strategy enough to outrun competitors, or are risks too high? Drop your takes in the comments—always love hearing from the community.
Disclosure: I hold a long position in BABA. This isn't financial advice; do your own due diligence. Data sourced from BofA Securities research dated September 24, 2025.
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