<div id="readability-page-1">Investors have largely ignored Chinese companies in recent years amid challenges such as the tech crackdown by the Chinese government, and its deteriorating relationship with the U.S. Lately, however, the vast stimulus package announced by the Chinese government has brought Chinese companies back on investors' radar. In particular, investors have started paying more attention to well-established tech companies like Alibaba (BABA 0.45%) and Baidu Inc. (BIDU 0.40%). But which of the two is a better stock to focus on? Let's shed some light on this topic. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83OTM5NjEvY29uZnVzZWQtbG9va2luZy1tYW4td2VhcmluZy1zdWl0LWFuZC10aWUtd2l0aC1xdWVzdGlvbi1tYXJrcy1hYm92ZS1oaXMtaGVhZC10aGlua2luZy13b25kZXJpbmctd2hhdC10by1kby5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="467" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83OTM5NjEvY29uZnVzZWQtbG9va2luZy1tYW4td2VhcmluZy1zdWl0LWFuZC10aWUtd2l0aC1xdWVzdGlvbi1tYXJrcy1hYm92ZS1oaXMtaGVhZC10aGlua2luZy13b25kZXJpbmctd2hhdC10by1kby5qcGcmdz03MDA"/>Image source: Getty Images. </div> <h2>The tech giants' business models</h2> Alibaba and Baidu are first-generation technology companies in China that have continuously evolved and adapted over the last two decades to become huge tech conglomerates. The former began as an e-commerce operator, but over the years, it has expanded horizontally and vertically into other industries like fintech (Ant Group), cloud computing (Alibaba Cloud), logistics (Cainiao), local services, and entertainment. Its flagship Taobao and Tmall platforms hold the largest market share in China's e-commerce industry, while Alibaba Cloud is China's most dominant cloud computing provider. While Alibaba's e-commerce and cloud computing businesses are well-known among investors, other smaller but equally prominent businesses are also part of its empire. For instance, Cainiao Logistics is a significant player in China and overseas, serving over 200 countries and regions. Alibaba is also a leading e-commerce player in Turkey and Southeast Asia. In other words, while Alibaba might be a Chinese company, it has gone beyond its roots to become a global tech giant. Like Alibaba, Baidu has expanded from offering search engine services to other areas, such as AI Cloud, autonomous driving, and entertainment. Its flagship Baidu App has monthly active users (MAU) of 703 million, reaching roughly half of the 1.4 billion people in China. As the leader in China's search engine industry, Baidu generates most of its profits from advertising and marketing, which it has redirected over the years into growing its other ventures like AI Cloud and autonomous driving. <h2>What are the prospects for Alibaba and Baidu?</h2> So far, we have seen that Alibaba and Baidu are vastly different companies with different business models. Their prospects are different, too. Let's begin with Alibaba. On one end, Alibaba faces enormous challenges in defending its market share in the e-commerce sector in China. Smaller (and nimbler) competitors like Pinduoduo and Douying have been eating into its share in recent years as Alibaba lost its focus thanks to its ever-growing business empire. However, the new CEO has refocused the company on its core e-commerce business, and early results indicate that Alibaba is slowly getting back on track. For instance, in the latest quarter, gross merchandise value (GMV) and orders grew by high single digits and double digits, respectively. While Alibaba's China e-commerce business faces challenges, other segments like Alibaba Cloud, Cainiao, and overseas e-commerce are well-positioned to grow rapidly in the coming years. Take Alibaba Cloud, for example. This business is set to benefit from the ongoing migration to the cloud and the rapid growth in artificial intelligence (AI) adoption among companies. In the latest quarter, for example, revenue for public cloud and AI-related products grew by double digits and triple digits, year over year. Similarly, Alibaba's international e-commerce business delivered 32% revenue growth in the latest quarter, while Cainiao grew by 16% year over year. In other words, while Alibaba is unlikely to grow at its historical rates due to its size, it can still grow at reasonable rates, riding on the ongoing growth of the Chinese economy and the rise of its younger business ventures. Like Alibaba, Baidu's core advertising business faces challenges in growing thanks to the rise of other advertising platforms like Douying and Kuaishou. To put it into perspective, online marketing revenue fell 2% in the latest quarter, offset by the growth of non-marketing revenue by 10%. Fortunately, Baidu's advertising business remains highly profitable, which allows it to reinvest in other growth areas like AI Cloud. Another area of growth is Baidu's autonomous driving business, Apollo Go. This business has already delivered some promising results thanks to the huge investment made over the years. For instance, the ride-hailing service provided 899,000 rides in the second quarter of 2024, bringing its cumulative rides to over 7 million. There is no guarantee that these young ventures will reach their full potential, but if they do, it will create enormous value for shareholders in the future. <h2>What it means for investors</h2> Overall, there is no clear winner. Alibaba is a well-diversified e-commerce business with future growth opportunities in multiple industries in China and overseas. On the other hand, Baidu is primarily focused in China, but still has enormous potential if it can pull off its huge bets in AI Cloud and autonomous driving. Ultimately, investors should make decisions based on their circle of competence and their convictions regarding the future growth opportunities of both companies. </div>

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Investors are reconsidering Chinese tech stocks like Alibaba and Baidu amid recent government stimulus. Alibaba, a diversified e-commerce giant, faces competition but shows growth in cloud and international markets. Baidu, primarily focused on advertising, is investing in AI and autonomous driving, showing promise in these areas. Both companies have unique strengths and challenges, making it difficult to determine a clear investment winner.

- Investors have recently started to pay attention to Chinese companies like Alibaba and Baidu due to a new stimulus package from the Chinese government.  
- Alibaba, a diversified e-commerce giant, faces competition but shows growth potential in cloud computing and international markets, while Baidu focuses on advertising and emerging sectors like AI and autonomous driving.  
- Ultimately, investors must evaluate their own expertise and beliefs about the future prospects of both companies to make informed decisions.

Better Stock: Baidu or Alibaba?