Alibaba Stock Has Soared More Than 110% This Year. Here's Why It Might Not Be Too Late to Invest.

Its valuation, however, looks modest in relation to tech stocks and the broader market. The one area of the markets where investors have been hesitant to invest in recent years has been in Chinese stocks. Due to concerns about trade and government oversight in China, there's been some hesitation to hang on to promising growth stocks from that part of the world. This year, however, the stock has seen a resurgence. It has more than doubled in value, dwarfing the S&P 500 and its 17% gains. And while it has been red hot of late, it still may not be too late to invest in this top tech stock. Image source: Getty Images. AI is a huge opportunity for Alibaba. While the company is generating some promising growth from it, AI is still not making a big impact on its financials -- but that could change in the future. A staggering claim the tech company made when it posted its most recent results back in August was that its AI-related revenue was up triple digits for a remarkable eighth straight quarter. And yet, the company generated organic growth of just 10% for its June quarter. Alibaba's business is massive, with e-commerce still taking up the lion's share of its top line at more than 70%. Its cloud business, by comparison, accounts for just 13%. Over time, however, as its AI business continues to take off, the e-commerce business may account for a smaller piece. And when that happens, the company's overall growth rate should look much more impressive. Alibaba has multiple growth opportunities in AI, and it even has a large language model of its own: Tongyi Qianwen. It is also working on its own custom chip, and tech giant Apple has partnered with it on creating AI tools for the company's iPhones. These are all just examples of some of the growth opportunities Alibaba has on the horizon, which can accelerate its growth in the future. When you consider just how massive a player Alibaba is in the Chinese tech market -- reportedly 80% of the country's tech companies use Alibaba Cloud (as per data from 2023) -- and how plentiful its growth opportunities related to AI are, it's almost mind-boggling to see how cheap the stock is today. While it has doubled in value this year, remember, it's coming off a couple of tough years when investors were hesitant to invest in Chinese tech companies. Although there's still geopolitical risk to consider with Alibaba, investors can't help but look past that anymore in light of the growth potential it possesses. And even though the stock has done so well, it still trades at a fairly modest price-to-earnings multiple of 22. By comparison, the average stock on the Technology Select Sector SPDR Fund trades at a P/E of 44. Even the S&P 500 average is 26. The stock's modest valuation puts it in a good position to rally even higher, as Alibaba arguably warrants a premium for its tremendous growth opportunities. Instead, it's still trading at a discount. Even though Alibaba's stock has been on a tear of late, there's still time to invest in the business and potentially set yourself up for a good return in the long run. At a time when many AI stocks are trading at egregious valuations, Alibaba still looks cheap, and it may be one of the best stocks to own if you're bullish on AI. Before you buy stock in Alibaba Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Alibaba Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $603,392!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,241,236!* Now, it's worth noting Stock Advisor's total average return is 1,072% -- a market-crushing outperformance compared to 194% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Alibaba Stock Has Soared More Than 110% This Year. Here's Why It Might Not Be Too Late to Invest.

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