1. Alibaba Group Holding Limited (NYSE:BABA)
Forward P/E Ratio: 14.5
Earnings Growth This Year: 5.09%
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) is the top cheap Chinese stock to buy now. It operates as an e-commerce giant and a technology infrastructure company. The company runs well-known platforms including Taobao, Tmall, and AliExpress that enable businesses to sell products in China and internationally. On the other hand, AliExpress.com is a wholesale e-commerce marketplace that connects businesses with suppliers.
During the fiscal third quarter of 2025, the company highlighted its strategic focus on user first AI-driven approach. The management noted that they have been focused on two main areas: e-commerce and AI plus cloud computing. After a year of transformation, these businesses have shown accelerating growth momentum. Alibaba Group Holding Limited (NYSE:BABA) has largely completed the divestment of its offline assets, resulting in strong business fundamentals and profit-generating capabilities across its businesses. Overall revenue of the company, excluding Alibaba consolidated subsidiaries, grew 11% year-over-year, with AI-related product revenue maintaining triple-digit growth for the sixth consecutive quarter.
On February 28, Arete upgraded the stock to Buy from Neutral with a $164 price target. Moreover, Artisan Select Equity Fund in its Q4 2024 investor letter noted that the company’s valuation does not depict its true potential. Here’s what the fund said about the company:
“Alibaba Group Holding Limited’s (NYSE:BABA) share price decline was primarily giving back the gains from the prior quarter. Recall that all Chinese stocks surged last quarter after the Chinese government unveiled an unanticipated stimulus that temporarily captivated investors. The reality of the undersized stimulus and the challenges facing the Chinese economy eventually prevailed, leading Chinese equities—including Alibaba—to come back down to earth. Despite our concerns about China’s economic outlook, which we outlined in detail in last quarter’s letter, shares of Alibaba still represent significant value. The company is a leading player in several attractive market segments. We believe management is doing the right things, such as selling off businesses and returning capital to shareholders. It has made several changes to management and strategy that we expect will return the business to healthy growth over the coming year. In our opinion, the valuation is depressed and does not reflect a fair value for a company with these attributes.”
While we acknowledge the potential of BABA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.