Geoffrey Seiler, The Motley Fool

Mon, Jun 30, 2025, 3:45 AM5 min read

• Alibaba is becoming an artificial intelligence leader in China.

• Meanwhile, the turnaround of its e-commerce business is in full effect.

• The stock remains cheap, and the company has opportunities in other areas too.

• 10 stocks we like better than Alibaba Group ›

After a long, challenging period, Chinese e-commerce giant Alibaba (NYSE: BABA) has staged an impressive rebound in 2025; yet, even with shares up sharply on the year, the stock still looks undervalued given the progress across its businesses. Here are five reasons to keep buying the stock like there's no tomorrow.

Despite chip export restrictions, Alibaba has emerged as one of China's leading artificial intelligence (AI) players. Its proprietary Qwen model family is at the center of its AI push, and it's been rolling out versions tailored for specific tasks like coding and advanced math. It even has industry-specific models. Its newest iteration, Qwen3, adds hybrid reasoning capabilities that go beyond traditional large language models (LLMs), positioning Alibaba to serve more demanding enterprise workloads.

That effort is already showing up in its numbers. Last quarter marked the seventh straight period of triple-digit AI-related revenue growth in its Cloud Intelligence business. Segment revenue, meanwhile, rose 18%, and adjusted earnings before interest, taxes, and amortization (EBITA) surged 69%.

Perhaps more importantly, Apple selected Alibaba's models to power its Apple Intelligence offering in China. While regulatory delays have held up the rollout, the partnership signals Alibaba's growing credibility as a key AI player, and it just launched its new Qwen3 AI models that are compatible with Apple devices.

Alibaba's domestic e-commerce segment is finally regaining momentum. Despite increased competition, Tmall and Taobao are still two of the largest online retailers in China, and the company has been investing to strengthen their positions. Gross merchandise volume (GMV) growth has improved, and Alibaba is now monetizing that better through a small software fee and its AI-powered marketing product, Quanzhantui.

In the most recent quarter, third-party revenue rose 12%, while overall e-commerce revenue climbed 9% and segment EBITA grew 8%. The company also continues to expand its 88VIP premium membership program, which grew by double digits and crossed 50 million members.

The next phase of growth could come from "instant commerce," with Alibaba looking to offer delivery on items purchased on Taobao within an hour. Management believes this could be a billion-customer opportunity over time. It also struck a smart deal with Rednote, a popular Chinese social media platform, to embed Taobao links directly into user posts. That's a smart way to tap into social commerce without building it from scratch.