This Chinese AI Bet Has Outperformed Magnificent Seven Names Like Meta and Google This Year

Magnificent Seven who? That’s what some U.S. investors might be asking themselves after Alibaba’s stellar earnings pushed its U.S.-listed stock more than 8 percent higher Thursday, bringing its year-to-date gains above 60 percent. The strong showing reinforced its position among investors’ favorite AI bets, particularly in comparison to its U.S. peers like Meta, Alphabet and Microsoft. It’s worth highlighting, too, that intrigue around Alibaba has spiked this week, with its co-founder Jack Ma making a rare public appearance Monday with Chinese President Xi Jinping. Here’s how the company performed in the quarter to December 31: Earnings per share: $2.93, above expectations for $2.66 Revenue: 280.15 billion yuan, above LSEG expectations for 279.34 billion yuan Net income: 48.945 billion yuan, above LSEG expectations for 40.6 billion Notably, Alibaba’s Cloud Intelligence Group saw its sales growth surge 13% compared to a year ago to 31.742 billion yuan. “This quarter’s results demonstrated substantial progress in our ‘user first, AI-driven’ strategies and the re-accelerated growth of our core businesses,” Alibaba chief executive Eddie Wu said in a statement. Alibaba has proven largely unaffected by the recent DeepSeek scare that throttled US tech stocks. Only a week ago, Alibaba announced a partnership with Apple to integrate Alibaba’s AI into iPhones in China. Indeed, Bloomberg Intelligence analysts wrote in a note Thursday that the company’s decisions through 2024 have panned out as effective strategies to fend off domestic competition too from Huawei, Tencent, Baidu and others. It’s also better positioned than its rivals, in Bloomberg Intelligence’s view, to withstand headwinds from a potential US-China trade war. That said, Alibaba’s margins could see weaker growth should the company continue to push for revenue growth. “Alibaba is likely to sacrifice some margin growth in e-commerce, logistics and cloud through the fiscal year ending March 2026 as it focuses on driving up revenue,” said Bloomberg Intelligence senior industry analyst Catherine Lim. “The company aims to enlarge the market shares of these businesses, in mainland China and overseas. That could fuel up-front expenditure on technology-led process upgrades, AI-related development and logistics solutions in the next 13 months.” As a side note, the Wall Street Journal reported Thursday that GameStop’s billionaire CEO Ryan Cohen raised his personal stake in Alibaba to roughly 7 million shares worth about $1 billion. Cohen, who is steering a company with a rising stock in his own right, seems to like the AI play. “The AI era presents a clear and massive demand for infrastructure,” Alibaba’s Wu said on the earnings call. “We will aggressively invest in AI infrastructure. Our planned investment in cloud and AI infrastructure over the next three years is set to exceed what we have spent over the past decade.” BY PHIL ROSEN, CO-FOUNDER AND EDITOR, OPENING BELL DAILY @PHILROSENN