With the broad basket of Chinese internet stocks marching higher again, investors may wish to give the forgotten names a second look for their newfound momentum and intriguing new AI developments. Undoubtedly, the price of admission to the AI boom is getting a bit high in the U.S. market. And while America’s AI lead is likely to hold up, I still think it’s a wise idea for investors looking to bet on the transformative, even revolutionary trend to consider diversifying internationally.
Undoubtedly, there are far lower valuations and the potential for surprises (think DeepSeek) as China looks to play catch-up in its own AI race. Additionally, with the Chinese government likely only to give the green light to domestic AI models while shutting out just about everything else, I think there’s a strong case for nibbling on a few of the Chinese tech giants as we move further into the AI age.
Let’s check in with two Chinese internet stocks that may prove too cheap at current levels, especially as investors begin to warm up to the AI opportunity at hand.
Alibaba
It’s been a forgettable past few years for shares of Alibaba (NASDAQ:BABA), which have punished dip-buyers until more recently. The stock, which lost well over 76% of its value at its worst point, is now starting to show signs that it’s ready to make up for lost time. Year to date, shares of BABA are up around 94%. And while recent melt-ups in the stock have been followed by equally steep declines, I do think that initiating a small position very slowly over time could make a lot of sense, especially after the e-commerce juggernaut shed more light on its ambitious AI plans.
Whether we’re talking about the continued development of its Qwen model, which is getting quite competitive with other large language models (LLMs), the tens of billions in spending on AI chips and data centers, or smaller bets on AI up-and-comers, it’s clear Alibaba is a serious AI contender, and one that investors may still be discounting.
Sure, the Chinese economy may still be in a rough spot, but as Alibaba moves full speed ahead on AI, I do think any quarterly shortcomings in the e-commerce division are forgivable, especially when you consider the incredibly low price of admission into the shares. The stock trades at 18.7 times trailing price-to-earnings (P/E), which seems too cheap for a firm that’s been moving as fast on AI as its American rivals.
At this juncture, I think too many investors are sleeping on the brand-new Qwen-3 model and its new AI chip plans. Sure, the stock melted up in response to Alibaba’s new AI roadmap, but I think the move is underdone when you consider shares are still down 47% from their all-time highs not seen since October of 2020.
Baidu
Baidu (NASDAQ:BIDU) is another long-time underperformer that only recently woke up, thanks in large part to growing enthusiasm over newly announced AI efforts. The stock has been dragging its feet for many years now after imploding by around 77% from peak to trough. Over the past month, though, BIDU stock has gained close to 48%. And the AI-driven drivers might not be done nudging shares higher on the year quite yet. First, the stock looks ridiculously underpriced at 12.4 times trailing P/E.
In many ways, Baidu stands out like the Google of China. And with that comes a massive data advantage that may very well allow the firm to take a lead in the AI race over in China.
With news recently breaking surrounding Baidu’s Ernie X1.1 reasoning model, which can reportedly keep up with OpenAI’s GPT-5 and Gemini 2.5 Pro, questions linger as to whether the “plateau” in large language model advancement is giving Chinese rivals a chance to even the playing field. As always, time will tell. But as an AI investor, I’d think deeply about some of the AI innovators over in China, should another DeepSeek moment be in the cards at some point in the future.
As always, Chinese stocks can be dangerously volatile and unforgiving to traders looking to make a quick profit. If you’ve got the risk tolerance, perhaps buying BIDU stock on pullbacks is the best way to go.
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