Artificial intelligence (AI) is reshaping global technology, and much of the attention naturally goes to U.S. companies such as Nvidia, Alphabet, and Microsoft. But investors looking for exposure to the next decade of AI growth shouldn't overlook one of Asia's most prominent players: Alibaba Group (BABA 1.16%).
Alibaba spent the past few years navigating regulatory pressures, competitive threats, and slowing consumer demand. But beneath this noise, the company has quietly positioned itself at the center of China's AI transformation. Its latest September 2025 quarter highlights that shift: Cloud revenue surged 34% year over year, and AI-related cloud revenue delivered triple-digit growth.
If investors want a long-term way to participate in China's AI boom, Alibaba offers a compelling and underappreciated path. Here are three reasons why.
Image source: Getty Images.
Alibaba Cloud is becoming the backbone of China's AI boom
AI workloads don't run on desktops -- they run on the cloud. Every model needs infrastructure to train, fine-tune, and deploy. In China, Alibaba Cloud sits directly in the middle of that demand.
In the latest quarter, Alibaba Cloud delivered 34% year-over-year revenue growth, far outpacing the company's overall growth rate. Management also reported that AI-related revenue grew at triple-digit rates for the ninth consecutive quarter. These numbers matter because they confirm a structural shift: AI is no longer a "future opportunity" for Alibaba Cloud; it is the segment's primary growth engine.
Companies across China from multiple industries are adopting AI to improve productivity, automate workflows, and analyze data. They naturally turn to the cloud provider with the most enormous scale, the most mature ecosystem, and the broadest enterprise reach. That provider is Alibaba Cloud.
If AI adoption accelerates across China, Alibaba stands to capture significant incremental spending. The company's infrastructure, model-hosting capabilities, and enterprise tools position Alibaba Cloud as a core foundational layer for China's AI economy.
NYSE: BABA
Key Data Points
Alibaba built a full-stack AI strategy with real defensibility
What makes Alibaba especially interesting is that it isn't relying on a single AI product or service. Instead, it has built a vertically integrated AI stack -- similar to what AWS, Azure, and Google Cloud offer in the West.
At the top of the stack is Tongyi Qianwen (Qwen), Alibaba's large language model that powers a growing portfolio of consumer and enterprise applications. Alibaba has already deployed Qwen in areas like customer service automation, enterprise productivity tools, and creative content generation. This list of functions will continue to grow with time.
Below the model layer, Alibaba provides the compute needed to train and run these models. Its cloud infrastructure supports training, inference hosting, and fine tuning. This is where much of the triple-digit revenue growth is coming from.
Finally, Alibaba is developing domestic AI chips. These chips aim to reduce Alibaba's reliance on U.S. semiconductor suppliers and lower long-term cost structures. While still in early stages, this initiative strengthens Alibaba's pipeline of AI technologies and reflects its ambition to control the full AI stack.
This multi-layer approach gives Alibaba a real competitive advantage. It isn't just a cloud vendor or an e-commerce platform with AI features. It is building the infrastructure, models, and tools that Chinese enterprises will rely on for years.
Alibaba can deploy AI across China's largest digital ecosystem
Perhaps Alibaba's most overlooked advantage is the breadth of its ecosystem. AI doesn't create value in isolation; it creates value when applied at scale. And no company in China has more surfaces to apply AI than Alibaba.
AI already enhances product search, feed ranking, and personalized recommendations across Taobao and Tmall. In Cainiao Logistics, AI supports route optimization, warehouse robotics, and demand forecasting. DingTalk integrates AI assistants into meetings, documents, and workflow automations used by millions of organizations. Even local services and delivery operations use AI dispatching systems to improve efficiency.
This massive ecosystem creates a powerful flywheel:
- AI improves operations and user experience.
- Better performance attracts more merchants, shoppers, and enterprise clients.
- Increased usage generates more data.
- More data improves Alibaba's AI models.
- Improved models strengthen the cloud and ecosystem further.
Few companies globally can replicate this dynamic. Alibaba's ability to embed AI across consumer, enterprise, and logistics touchpoints gives it a unique way to monetize AI beyond cloud revenue alone.
What does it mean for investors?
Alibaba has spent the last two years strengthening its cloud capabilities, scaling its AI portfolio, and integrating AI across its consumer and enterprise products. The September 2025 quarter confirmed that this transformation is gaining real momentum.
Investors won't find a graffiti-like "AI stock" label here. Instead, they will find a company that is quietly positioning itself as China's AI operating system -- the infrastructure layer, the foundational model provider, and the ecosystem that brings AI into everyday use.
For long-term investors seeking a strategic and diversified way to participate in the AI boom, Alibaba deserves a closer look.
