The AI and tech trade has been tripped up in recent months. But before you head for the exits, it might be worth checking in your AI watchlist now that valuations have come in — significantly, in some cases. Either way, there’s no shortage of value, at least in my humble opinion, especially since there are now dozens of tech companies with skin in the AI game that are in a bear market right now.
In fact, some of the more exposed supposed AI “losers” might have already suffered a 50% markdown. It’s hard to gauge which bargains are the best right here, especially if you don’t want to be on the wrong side of a profound technical trend (think software stocks amid the rise of AI-native disruptors).
That said, I do think you no longer have to look too far for AI growth at a reasonable price. In many ways, the GARP trade is back, and that’s reason to take a closer look at the hard-hit tech stocks, rather than steer clear of them and rotate into steadier dividend stocks like everyone else.
Of course, if your stomach has been challenged, a bit of defensive rotation never hurts. However, if you’re against following the herd and find the “safe havens” to be a tad on the expensive side, perhaps it’s worth braving the tech wreck even if the names have yet to hit rock bottom.
The case for buying the dip in Alibaba stock
From the Magnificent Seven (or the Lag Seven as they’re now referred to by some) to the AI-savvy SaaS companies and even the indebted AI infrastructure players, it feels like there’s value all around us in tech. For those seeking deeper value, I think Chinese internet giants, like Alibaba (NASDAQ:BABA), stand to offer even more bang for the buck in this current environment.
So, why go with a name like Alibaba when there are perfectly good and cheap comparable AI beneficiaries in the U.S. market right now?
First, the stock trades at a multiple that’s absolutely ridiculous. The Chinese Mag Seven comparable goes for 14.6 times forward price-to-earnings (P/E), which doesn’t seem to make much sense, even with the China discount considered. Of course, the added risks of investing in China make for a riskier, scarier bet for some. That said, the risks associated might already be more than priced in at these multiples. Time will tell, though.
It’s leading the way in open-source AI while readying for the robotics boom
Alibaba is a force in AI with its popular Qwen model, which is taking the world by storm. Arguably, Qwen is winning the open-source AI model war, and as its offerings (think its cheap Qwen 3.5 model) get better, adoption could become even more impressive.
The Chinese cloud titan also looks ready for the next wave of AI. The company recently released a physical AI model named RynnBrain. Though it’s early, early demonstrations are seriously impressive.
If China is, in fact, not too far behind the U.S. in AI innovation, perhaps it makes sense to own a bit of Chinese AI titans as well. With a robust cloud business and the potential to floor it on robotics, I wouldn’t sleep on Alibaba shares right here. The stock is way too cheap, and its coming growth drivers are severely underrated.
The bottom line
Whether China can pull ahead as AI moves into the physical realm remains the big question.
Either way, Alibaba may very well be the cheapest play on physical AI today. Whether it’s physical AI models or strategic bets, including its recent bet on robovan firm Zelos, I’m inclined to view Alibaba as an AI sleeper that could wake up at some point this year.
The stock has already been punished, now down more than 31% from its 52-week high. Perhaps the selling is overdone, especially in light of new AI innovations, like Qwen 3.5, that stand out as credible challengers to U.S. comparables.
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