BABA Stock Is Flashing a Buy Signal Most Investors Are Completely Ignoring

When a stock like BABA is hovering in the mid-$120s while analysts covertly raise their price targets above $185, there’s a moment when you start to wonder if the market is just not paying attention or if it has a secret. The trajectory of Alibaba’s stock has been among the most bizarre in contemporary financial history. A company with a mountain of AI ambition and a valuation that, by at least one serious measure, appears to be severely undercooked that once traded above $300 is currently about 60% off that peak.

Currently, the DCF model, which isn’t exactly a flattering tool, indicates an intrinsic value of about $193 per share. That represents a 34% reduction from a recent trading price close to $127. Anyone who has lost money on Chinese tech stocks over the past five years will tell you that models aren’t crystal balls. But at least it’s worth stopping at such a large gap.

The Motley Fool recently revealed that Alibaba plans to invest over $50 billion in AI infrastructure over the course of the next three years. This amount may seem excessive, but keep in mind that the company operates one of Asia’s most powerful cloud computing businesses. Quarter by quarter, deal by deal, Alibaba Cloud is becoming more than just a cost center.

In recent weeks, analysts at UBS, Nomura, and JP Morgan have echoed Morgan Stanley’s direct statement that “AI is starting to pay off,” as reported by CNN. It’s difficult to write it off as noise when so many significant institutions are saying the same thing.

However, the baggage associated with BABA stock does not go away overnight. The five-year return is approximately 44% negative. It’s not a typo. Investors who jumped on the bandwagon during the pandemic have been watching that position deteriorate for years.

The Motley Fool is a structural drag that hangs over every earnings report like a low cloud. The Chinese economy never fully recovered from COVID-19, and consumer spending has remained consistently weak. Even optimists seem to be holding their breath a bit.

The momentum of AI funding and Alibaba’s role in it changed the story, at least in part. After adjusting for asset sales, the company reported revenue growth of 15% to $34.8 billion in its most recent quarter, which surprised some observers

. At the same time, significant infrastructure spending put pressure on adjusted EBITA—the kind of short-term suffering that occasionally precedes long-term positioning. Depending on how serious you think the AI cloud demand cycle is, that trade-off may or may not be worthwhile.

The compression in China’s e-commerce EBIT has been noted by analysts.The company reported a substantial quarterly loss, which was primarily related to investments in cloud infrastructure and rapid commerce. It’s possible that Alibaba is just spending money at a rate that makes traditional valuation metrics less applicable at the moment. It’s also possible that Amazon looked exactly like this before it evolved into what it is today. Although that parallel isn’t perfect, it’s also not unimportant.

At $187.23, the 12-month average analyst price target suggests an increase of more than 53% from recent levels, according to TipRanks. That is an impressive figure. Not everyone agrees; in recent weeks, some targets have been lowered, such as Susquehanna’s from $190 to $170 and Jefferies’ from $212 to $185.

Even the bulls are following a more constrained route than they were a year ago, as can be seen by observing these changes in real time. No one is extremely self-assured here, and considering everything, perhaps that is a reasonable stance.

To be honest, tracking the relationship between BABA stock and geopolitics is quite taxing. At its worst, Beijing’s regulatory crackdown between 2021 and 2023 reduced the company’s market capitalization by over $600 billion. Early in 2026, the stock had partially recovered those losses thanks to excitement surrounding artificial intelligence and what appeared to be a thawing of tensions between Alibaba and Beijing The Motley Fool.

However, the word “thaw” has inherent ambiguity. The stock still trades at a significant discount to American peers with comparable profiles, which is likely due to the fact that no one truly knows how long that détente will last.

However, it’s difficult to ignore the growing body of evidence supporting the AI infrastructure narrative. In order to create what it refers to as a “general world model”—an advanced AI that can comprehend and replicate real-world environments—Alibaba-backed ShengShu Technology recently closed a $293 million funding round. It’s noteworthy that Baidu Ventures joined Alibaba’s cloud division in that round.

Co-investing in each other’s wagers indicates that the Chinese AI ecosystem as a whole is developing more quickly than most Western observers realize.

Alibaba currently has a price-to-earnings ratio of roughly 22, which is higher than in previous years but still less expensive than the majority of Magnificent Seven stocks and The Motley Fool. It’s still unclear if the “Chinese tech discount” will remain a permanent aspect of these stocks’ pricing or if the market will completely close that valuation gap.

In any case, investors are being asked a direct question by BABA stock at these levels: do you support the AI cloud cycle, and are you prepared to take on the political risk associated with a Hangzhou-based company? At $127 per share, the question is at least worth considering carefully, even though the answer is not immediately apparent.