In recent years, tech companies have experienced significant growth fueled by artificial intelligence (AI). And while the growth may be slowing down for some businesses, there are some that are still doing well and are even in their early growth stages.
One company that has been producing some terrific AI-powered growth is Chinese tech giant Alibaba Group Holdings (BABA 1.90%). Although its recent earnings numbers didn't look terribly impressive, underneath the hood, its AI business has been taking off.
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Alibaba's AI business grows by triple digits, again
Last month, Alibaba reported its quarterly results for the period ending June 30. At first glance, they didn't appear to be that impressive, as its top line rose by just 2% year over year, totaling $34.6 billion. But when excluding businesses it has recently divested itself of, its growth rate would be around 10%. Its cloud business experienced 26% revenue growth and what was particularly impressive was that its AI-related product sales grew by triple digits for an eighth straight quarter.
The company's business centers around e-commerce, which is why although Alibaba is experiencing strong AI growth, the top line may not be moving as significantly. The company's international and domestic commerce segments generated a combined $24.4 billion in revenue this past quarter, accounting for around 71% of its top line.
Alibaba's broad and large business means it may take a while before AI gets big enough to make a larger impact on the top line, but the good news is the business is demonstrating some strong growth from it.
Big ambitions for AI
What's exciting for investors is that Alibaba is producing good AI-related growth, and it's still in the early innings when looking at the bigger picture.
The company has its own AI chatbot, Qwen, which can do many of the same things ChatGPT can do, including generating video. Although it may not be as widely popular or well known as ChatGPT, the company's AI model could be a formidable option for users, particularly in China. Not only could it enhance the company's existing products and services, but it may become a driver of revenue growth in the future.
Alibaba has also been making its own AI chip, in an effort to become less dependent on U.S. companies and potentially fill a significant need in the Chinese market. Nvidia CEO Jensen Huang says China's AI market is worth around $50 billion and growing by an estimated 50% annually.
One tech company that has shown confidence in Alibaba is Apple, which partnered with the Chinese company earlier this year to help develop AI features for its new iPhones.
NYSE: BABA
Key Data Points
Alibaba is still a cheap-looking stock
Year to date, shares of Alibaba are up around 66% (as of Monday). Last year, I said it may have been the most underrated AI stock to own, and despite its impressive rally thus far in 2025, I still think it could have more room to rise even higher. The stock still trades at a fairly low price-to-earnings multiple of 16, and with tremendous AI growth prospects and a strong presence in a huge market like China, the business could get much larger and more valuable in the future.
The stock looks cheap when compared to the broader markets, as the average S&P 500 stock trades at around 25 times its trailing earnings.
Alibaba has come a long way in the past year, and it's still not too late to invest in the business today, as it looks like a fantastic growth stock to just buy and hold.
