We recently published a list of the 10 Best Chinese Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against the other Chinese stocks held by billionaires.
The People’s Bank of China’s (PBoC) monetary easing and government stimulus have lifted the valuations of Chinese equities. A few months ago, many investors were expecting the U.S. economy to be in a better position and Chinese stocks were facing significant regulatory worries. However, the tables have turned with the Chinese economy expected to be in a better position compared to 2024.
A Positive Outlook for China
Things have taken a wild turn with the U.S. president imposing high tariffs and investors expecting an economic slowdown in the U.S. On the other hand, China’s advancement in AI and its capabilities to grow its AI infrastructure have intensified since the launch of DeepSeek’s R1 model.
“The U.S. has had a good period, and that’s coming to an end because Trump’s policies are very anti-economy. China has had a very bad period, but it looks as if it’s starting to recover,” Richard Harris, CEO of Port Shelter Investment Management, told CNBC.
Chinese government support for its technology sector has induced much optimism among investors. The Hang Seng Tech Index, which tracks some of the largest Chinese companies listed in Hong Kong, has soared over 21% year-to-date, as of March 25. At the same time, the NASDAQ 100 index, covering the U.S. tech stocks, has plunged over 3.70%. Whereas, the Shanghai Composite Index has risen over 3% compared to a drop of 1.70% in the S&P 500 index.
“Performance of the HSCEI/MSCI China in the past 17 months trended closely to the trajectory a decade ago, making us worry that we might be approaching some correction soon,” analysts at the Bank of America wrote in a report published on March 17.
Harris believes that China’s A shares have been quite depressed for some time compared to the U.S. stocks. With valuation improvements and optimism in the tech sector in China, it is a good time to explore Chinese stocks.
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Our Methodology
To compile our list of the best Chinese stocks to buy according to billionaires, we looked for the Chinese stocks widely held by billionaires. Data for the number of billionaire investors for each stock was taken from Insider Monkey’s database, updated as of Q4 2024. Finally, the 10 best Chinese stocks to buy were ranked in ascending order based on the number of billionaires holding stakes in them. We have also mentioned the number of hedge funds that held these stocks as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Alibaba Group Holding Limited (NYSE:BABA)
No. of Billionaire Investors: 17
Total Billionaire Stake: $2.61 Billion
No. of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) is a leading Chinese multinational technology company with strong market positions in e-commerce, cloud computing, and digital payments. It also has operations in logistics, entertainment, and enterprise solutions. The company’s primary businesses include Alibaba, Taobao, Tmall, and Alibaba Cloud, which together handle millions of businesses and consumers worldwide.
The company has committed nearly $53 billion towards developing AI and cloud computing infrastructure over the next three years. Alibaba’s cloud business continues to gain momentum, soaring by 13% year-over-year in Q4 2024, with AI-related revenue recording a triple-digit growth for the sixth consecutive quarter. The company’s overall profitability remains solid, with adjusted EBITA margins around 20%, driven by robust Cloud Intelligence and TTG’s EBITA growth.
Alibaba Group Holding Limited (NYSE:BABA) is well-positioned to take advantage of the growing AI and cloud market, backed by its planned infrastructure investments. In addition, the company’s FCF remains solid.
Baron Funds, an investment management firm, shared its “Baron Emerging Markets Fund” Q4 2024 investor letter, maintaining a positive view on Alibaba despite its underperformance in the last quarter of 2024. They commented:
“We retain conviction that Alibaba is well positioned to benefit from China’s ongoing growth in online commerce and cloud in China, though competitive market concerns remain.”
Overall BABA ranks 3rd on our list of the Chinese stocks to buy according to billionaires. While we acknowledge the potential of BABA as an investment, 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 30 Best Stocks To Invest In According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
