The Ultimate Growth Stock to Buy With $1,000 Right Now

It's tough to be excited about buying growth stocks right now. The advent of artificial intelligence (AI) has pushed too many of these related tickers up to uncomfortable levels. If they suffer a much-needed valuation correction, it very likely will drag the overall market down with them.

Now take a step back and look at the bigger global picture. Not every growth name is at risk here. Most of the frothiness is limited to stocks of U.S. companies. Overseas, most valuations still make sense.

Enter China's Alibaba Group (NYSE: BABA). It's a great pick if your largely American holdings have you a bit nervous at this time, but you're not finding much else to replace them with.

Plenty of e-commerce opportunity ahead

You probably know the company as China's e-commerce powerhouse... which it is. Its Tmall and Taobao platforms collectively account for 44% of China's e-commerce market, according to numbers from the International Administration. It's doing pretty well outside of China as well.

All told, its role as an online-selling middleman drives more than half of Alibaba's top line, while e-commerce outside of China accounts for nearly 15% of companywide revenue. And its online retailing arm will remain an important profit center for Alibaba well into the distant future, positioning the company to win at least its fair share of the 10% annualized growth that Mordor Intelligence expects of China's e-commerce market through 2030.

This is only half the reason Alibaba stock is the ultimate growth stock to buy right now, however, and not even the best half. The other more promising half is the company's waist-deep foray into the AI hardware market.

But an even bigger AI tailwind is now blowing

It's a saga fit for the silver screen.

It's not exactly a secret that Beijing supports and encourages the use of Chinese-made goods and technology within China whenever possible. It's just that American-made AI accelerators -- mostly made by Nvidia (NASDAQ: NVDA) -- got so good so fast that Beijing was relatively tolerant of their use if it allowed China's AI industry to take root.

That was never going to be permanent permission. The matter just came to a head earlier this year when the two countries in question entered an on-again/off-again tariff war. By August, Beijing effectively banned the purchase of Nvidia-made AI processors in China. Lo and behold, less than a month later, Alibaba unveiled its T-Head processor capable of doing most everything that Nvidia's now-banned AI chips can do. It even has at least two customers lined up, including China's telecom giant Unicom and search engine powerhouse Baidu (NASDAQ: BIDU).

Image source: Getty Images.

This is no small matter. It's very likely Beijing will remain staunchly opposed to foreign-made AI technology (citing digital security concerns), fueling the country's own AI infrastructure industry that's proven to be fully capable. Analysts with Morgan Stanley described the rise of China's nascent artificial industry in May as "a sleeping giant awakens."

And it's not just a headline meant to turn heads. The bank's analysts believe China's AI market to be worth $140 billion. When factoring all the indirectly related businesses into the mix, the country's AI industry could be worth a whopping $1.4 trillion. The bank goes on to suggest China's current investments in AI will break even by 2028, with a 52% return on this investment likely by 2030.

The real beneficiary of all this AI technology will be its users, of course, which includes Alibaba's e-commerce arm. Goldman Sachs expects the proliferation of business-building AI tech to add on the order of 8% to China's total GDP over the course of the coming decade. That's something that Alibaba's ready to help start making happen right now. And that's obviously something Beijing supports.

Undervalued because it's underestimated

Alibaba isn't the only Chinese company working on AI-capable processors. Biren and the aforementioned Baidu are working on this technology as well. So is Huawei. Huawei's planning on demand for 600,000 of its Ascend 910C chips next year, doubling this year's expected production. Alibaba will have credible competition even within its home country.

Alibaba arguably has an insurmountable lead on all of these would-be rivals. It also has the advantage of a profitable e-commerce business to help fund the ongoing development and commercialization of its AI tech. That's something that can't be said of all the other names in the business, including Biren.

Perhaps most important to interested investors right now, however, is how undervalued the stock currently is, priced at less than 20 times its trailing-12-month earnings. This doesn't reflect the full scope of the AI opportunity at hand even with the stock's 146% run-up from last year's low. That's the big reason analysts' current consensus opinion on the stock right now is still overwhelmingly a strong buy. The analyst community appears to see an explosion of AI revenue on the near-term horizon that the market just isn't pricing in -- an explosion that's expected to improve the company's revenue growth rate from 6% this fiscal year to more than 11% next year.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Baidu, Goldman Sachs Group, and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.