Why Bulls Are Getting Excited About Alibaba Again

Alibaba Group (NYSE: BABA) spent the past few years rebuilding investor trust. Regulatory crackdowns, fierce competition, and an uneven macroenvironment pushed the stock into deep value territory. Many investors moved on.

However, in recent quarters, the tone surrounding Alibaba has shifted. Bulls are leaning back in, sentiment is improving, and the company is delivering early signs of strategic progress. While risks remain, there are three clear reasons why bullish investors see Alibaba entering a new chapter.

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Cloud and AI momentum are gaining real traction

Alibaba spent years investing heavily in cloud infrastructure and artificial intelligence (AI). For a long time, investors questioned whether those efforts would be reflected in financial results. Now they do.

In the September 2025 quarter (fiscal Q2 2026), Alibaba Cloud revenue grew 34% year over year to RMB 39.8 billion ($5.6 billion), marking one of its strongest performances in recent years. More importantly, management reported that AI-related revenue grew at triple-digit rates for the ninth consecutive quarter. More importantly, it cemented its position in China's AI cloud market with a 36% market share.

This momentum reflects a genuine shift. AI workloads require more computing power than traditional cloud tasks, driving higher revenue per customer and stronger margins. Alibaba's Tongyi Qianwen large language models (LLMs), along with its suite of AI-powered enterprise tools and its extensive infrastructure, now sit at the core of its cloud strategy.

Bulls believe Alibaba has crossed an inflection point. Cloud and AI no longer represent "future optionality." They now act as active growth engines with expanding monetization potential. If this trend continues, these segments could meaningfully reshape Alibaba's profit mix over the next three to five years.

E-commerce performance is stabilizing

Alibaba doesn't need explosive e-commerce growth to support a recovery. It simply needs stability after years of pressure from Pinduoduo, JD.com, and Meituan. Recent data shows promising progress.

In the latest quarter, China's commerce revenue grew 16% year over year thanks to the rapid expansion of its quick commerce business, as well as an increase in take rates for its core customer management revenue. In particular, quick commerce is becoming a significant source of growth for this business and also a valuable tool for customer retention.

Bulls interpret this as a key turning point. The market no longer fears a structural decline in Alibaba's core business. Instead, the company now operates from a steadier base, which allows cloud and AI to become the primary growth drivers without constant drag from the commerce segment.

If Alibaba can sustain mid-single-digit to low-double-digit growth in commerce while its cloud and AI businesses scale, the company's overall revenue trajectory will improve dramatically.

Sentiment toward Chinese tech is stabilizing

Alibaba's sell-off from 2021 to 2023 wasn't driven solely by fundamentals. Sentiment collapsed due to regulatory uncertainty, foreign capital flight, and fears about geopolitical risk.

Lately, the narrative has shifted toward gradual stabilization. Regulators have adopted a more predictable, pro-growth stance, with a reduced emphasis on heavy-handed intervention. Bulls see this as a crucial factor because, like it or not, sentiment often drives major moves in Chinese tech stocks.

The most visible sign of this shift came when Cathie Wood bought Alibaba for the first time in four years in September. ARK Invest purchased approximately $16.3 million of Alibaba shares across two exchange-traded funds (ETFs), marking a notable return to a stock the firm had previously avoided due to intensified regulatory crackdowns. She added another $25 million worth of stock in November.

Add to that a series of more constructive updates from analysts, and bulls say the tide is turning. The return of institutional participation doesn't guarantee a smooth recovery, but it suggests that global investors now view Alibaba as more investable than it has been in years.

What does it mean for investors?

Let's be clear: Alibaba still faces fierce competition, China's macroenvironment remains uneven, and regulatory uncertainties can always reemerge.

However, the tone around the business has shifted in a way that investors haven't seen in several years. Alibaba now shows: convincing AI and cloud traction, an improving regulatory backdrop, returning foreign interest, and a stabilizing e-commerce foundation.

For bullish investors, those elements create a clearer long-term story. If cloud and AI continue to scale and if e-commerce maintains stability, bulls believe Alibaba could enter the early stages of a multiyear rerating.

Investors should closely monitor the next few quarters.

Lawrence Nga has positions in Alibaba Group and PDD Holdings. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.