<div id="readability-page-1"><p>The year 2025 has been challenging for many Chinese technology stocks. China's economy has been slowing down. In the second quarter of 2025, China's gross domestic product (GDP) grew by 5.2% year over year, down from 5.4% in the first quarter. Retail sales and property investment also softened in the second quarter, leaving many investors cautious. That backdrop seems to be weighing heavily on valuations of many Chinese stocks.</p> <p>Despite this, some China-based companies still offer significant upside potential. <strong>Alibaba</strong> <strong>Group Holding</strong> <span>(BABA<span> -1.53%</span>)</span> is one such company. Although it missed consensus revenue and earnings estimates in the recent quarter (the first quarter of its fiscal 2026, which ended June 30, 2025), the company warrants closer examination. I predict it will double over the next three years. And there's one thing in particular fueling my optimism. </p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzEwMzcvYnVzaW5lc3N3b21hbl93b3JraW5nX29uX2FfdGFibGV0LmpwZyZ3PTcwMA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzEwMzcvYnVzaW5lc3N3b21hbl93b3JraW5nX29uX2FfdGFibGV0LmpwZyZ3PTcwMA"/></p><p>Image source: Getty Images.</p> </div> <h2>AI + Cloud </h2> <p>Rapid momentum in Alibaba's cloud and artificial intelligence (AI) business is the key factor that can drive its share price growth. Alibaba's Cloud Intelligence Group revenue rose 26% year over year to nearly $4.7 billion in the most recent quarter, with AI-related sales growing year over year at triple-digit rates. AI has maintained this solid pace of growth for eight consecutive quarters, driven by the accelerated development of AI applications and the rapid adoption of AI by enterprise clients. AI applications are also driving demand for the company's traditional products, such as compute and storage.</p>  <p>To support this growth, Alibaba plans to invest 380 billion renminbi (about $52.5 billion ) over the next three years in cloud and AI infrastructure. The company invested RMB 38.6 billion in AI and cloud infrastructure in the recent quarter and more than RMB 100 billion in the past four quarters, primarily for expanding AI capacity and product development.</p> <p>The Chinese data center market is expected to grow from $16.4 billion in 2024 to $32.2 billion in 2030. In the first quarter of 2025, Alibaba accounted for an estimated 33% of cloud infrastructure services spending in China, while Huawei and <strong>Tencent </strong>accounted for 18% and 10%, respectively. With demand for AI training and inference rising across industries and Alibaba's focus on rapidly scaling cloud and AI capacity, the company seems well positioned for long-term growth.</p> <p>Alibaba has already entered into a strategic partnership with <strong>SAP</strong> to provide cloud and AI services support to the latter's enterprise clients. Alibaba is also advancing the capabilities of its Qwen3 AI foundational models and has introduced AI-native applications, such as Amap 2025, a location-based application, and DingTalk's new workplace agent. Hence, Alibaba is not only building AI infrastructure but also AI applications to create a sticky customer base.</p> <h2>International markets</h2> <p>Alibaba is also focusing on diversifying its revenue base beyond China. The company has announced new data centers in Malaysia and the Philippines, and it recently launched a global AI innovation hub in Singapore to support more than 5,000 businesses and 100,000 developers.</p> <h2>Core e-commerce business</h2> <p>Although AI and cloud are the key catalysts, Alibaba's traditional e-commerce business continues to deliver strong growth. China e-commerce revenue grew 10% year-over-year to RMB 140.1 billion in the first quarter.</p> <p>The company is also doubling down on the Chinese quick commerce market -- delivery in under an hour --  which is estimated to grow from $92.7 billion in 2025 to $135.5 billion by 2030. The quick commerce business on its Taobao app had almost 300 million monthly active users in August 2025, with peak daily orders hitting 120 million. The high level of user engagement is driving higher advertising and transaction fees, which in turn strengthen Alibaba's financial base.</p> <h2>There are a few risks</h2> <p>Certain risks, however, cannot be ignored. With China's economy slowing and consumers under pressure, the company's e-commerce business may face stagnation. Competition in quick commerce from players like <strong>Meituan</strong> and Kuaishou remains fierce. Additionally, quick commerce also requires higher capital expenditure for expanding the rider base and warehouses.</p> <p>Increasing uncertainties in global chip supply could also prove a challenge to Alibaba's plans to expand data center capacity. However, Alibaba has developed its own inference chip to reduce its reliance on U.S. chip players.</p> <p>Investors should expect short-term volatility, as management may temporarily prioritize growth over margins.</p> <h2>Valuation is reasonable</h2> <p>Alibaba's valuation also leaves plenty of room for upside. The stock is trading 56% below its all-time high of $307.80 in October 2020, due to increasing regulatory pressures and concerns about slowing growth. The company is currently trading at 14 times forward earnings estimates, which is far lower than its historic five-year average of 26.6. On the other hand, e-commerce peers such as <strong>Amazon</strong> and <strong>MercadoLibre</strong> trade at a forward price-to-earnings ratios of 34.6 and 46.5, respectively. So investors are willing to pay more for them. </p> <p>Analysts expect Alibaba's earnings per share (EPS) to be around $7.78 in fiscal 2026 (ending March 31, 2026), $10.20 in fiscal 2027, and $11.99 in fiscal 2028. Even if the company's forward P/E multiple improves to 25 (in line with its historic average multiple, still a discount to U.S. peers), the stock would trade close to $300 -- more than double its current share price of $135 (as of Aug. 31, 2025). <strong><br/></strong></p> <p>I think it is apparent that even without unrealistic assumptions, Alibaba's stock can double by 2028.</p>                                                                            </div>

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<p>Alibaba Group Holding is predicted to double its share price over the next three years, driven by rapid growth in its cloud and AI business. Despite recent earnings misses, Alibaba's Cloud Intelligence Group revenue rose 26% year-over-year, with AI sales growing at triple-digit rates. The company plans to invest approximately $52.5 billion in cloud and AI infrastructure over the next three years. While risks such as economic slowdown and competition exist, Alibaba's valuation remains attractive, trading significantly below its all-time high and at a lower price-to-earnings ratio compared to peers.</p>

- In 2025, Chinese technology stocks, including Alibaba, face challenges due to a slowing economy, with GDP growth declining to 5.2% in Q2.  
- Despite missing revenue estimates, Alibaba's cloud and AI sectors show significant growth, with plans to invest 380 billion renminbi in infrastructure, positioning the company for long-term success.  
- Analysts predict Alibaba's stock could double by 2028, supported by a reasonable valuation and strong performance in its core e-commerce business, despite potential risks.  

Prediction: Alibaba Will Double Over the Next 3 Years. Here's 1 Reason Why.