We recently published a list of 12 Cheap AI Stocks to Buy in 2025. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against other cheap AI stocks to buy in 2025.
Artificial Intelligence (AI) was a buzzword around Wall Street for most of 2024. AI has shown immense promise but comes with significant risks. Big AI players are dominating the broader market, but there will be opportunities for other companies to explore as the AI market continues to expand. For instance, the new administration is keen on technological advancement, and recently, President Donald Trump announced a $500 billion AI initiative, a joint venture known as Stargate between OpenAI, Softbank, and Oracle.
However, DeepSeek’s introduction shocked the U.S. companies after it released a new AI model, a much better alternative to GPT-4. DeepSeek claims to have designed the AI model in just two months and at around under $6 million using Nvidia’s less-advanced H800 chips, as reported by Reuters on January 27. Since the news broke out, NVIDIA Corporation (NASDAQ:NVDA) shares have plunged over 16%, wiping away $600 billion in market capitalization, the biggest one-day loss in U.S. history.
Moor Insights & Strategy founder, CEO, and chief analyst Patrick Moorhead, speaking to Market Domination, shared his views on DeepSeek. Moorhead was impressed by the efficiency of DeepSeek’s AI. He pointed out that the Chinese have used different techniques compared to American developers, where they were able to parse or train maybe 5% of the data, which is a 95% reduction.
However, Moorhead also addressed the U.S. market drop as an “overreaction.” “I think the market overall should be going crazy because [this is the] uplift of what we were looking for [from AI],” said Moorhead. He added that the investors’ focus should be on the progress in inference.
It might be a good time to invest in AI stocks, especially cheap AI stocks during the market’s overreaction.
Our Methodology
To determine the list of cheap AI stocks, we went through various news articles and stock analyses. We shortlisted the AI stocks with the minimum analyst upside of 30%, as of January 27. Cheap, in the context of this article, means stocks that Wall Street analysts believe are undervalued and will surge to higher share prices. We have ranked the cheap AI stocks to buy based on their popularity among hedge funds, as of Q3 2024, in ascending order.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An e-commerce platform displaying a wide range of products to customers online.
Alibaba Group Holding Limited (NYSE:BABA)
Analyst Upside (as of January 27): 33.40%
No. of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE:BABA) is the largest Chinese online retailer that uses AI in its e-commerce business. Alibaba is also expanding its presence in the cloud business. On January 21, the South China Morning Post reported that BABA’s cloud business and AI arm, Alibaba Cloud, has introduced an expanded suite of its proprietary LLMs under its Qwen family.
During the second quarter of FY2025, Alibaba Group Holding Limited’s (NYSE:BABA) cloud business posted a year-over-year increase of 7%, driven by double-digit growth in public cloud services. The company’s AI products within the cloud segment showed notable performance, maintaining a triple-digit growth for five consecutive quarters.
On January 21, BofA analyst Joyce Ju kept a Buy rating on BABA shares and increased the price target to $117 per share from a previous target of $112. The analyst expects the company to post a 9% year-over-year increase in revenue during Q3 FY2025 and surpass Wall Street estimates by 2%. Considering the sudden rise of Chinese AI startup DeepSeek, Chinese AI stocks hold a lot of promise in 2025.
Overall, BABA ranks 3rd on our list of cheap AI stocks to buy in 2025. 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.
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Disclosure: None. This article is originally published at Insider Monkey.