Alibaba’s AI push narrows valuation gap, spotlighting future earnings growth.

Alibaba’s AI rollout is already showing measurable impact on its e‑commerce ecosystem, according to a Bloomberg analysis of recent Chinese AI activity. The company has integrated large‑language‑model capabilities into its “Quanzhantui” digital‑marketing platform, which powers product recommendations and ad placements on Taobao and Tmall. In the most recent Singles’ Day campaign, merchants using the AI‑enhanced tool reported a 12 percent lift in conversion rates compared with those relying on traditional keyword‑based targeting, the South China Morning Post noted. The boost is significant because Singles’ Day accounts for roughly 70 percent of Alibaba’s annual gross merchandise volume, meaning even modest efficiency gains translate into billions of yuan in incremental revenue. Bloomberg’s coverage of the “DeepSeek frenzy” in China highlights that Alibaba’s AI push is part of a broader national effort to accelerate home‑grown models, positioning the firm to capture a larger share of the domestic AI‑driven advertising market that analysts have long thought was dominated by Baidu and Tencent.

The valuation gap that has plagued Alibaba relative to U.S. peers such as Amazon and Microsoft appears to be narrowing as investors re‑price the company’s growth prospects. Simplywall.st reports that analysts who once assigned Alibaba a price‑to‑sales multiple 30 percent below the sector average are now forecasting a 1.8‑times multiple for the next twelve months, up from 1.3‑times a year ago. The revision reflects expectations that AI‑generated revenue streams—particularly the AI‑augmented marketing suite and the upcoming “AliGen” generative‑AI cloud services—will lift the firm’s earnings‑before‑interest‑tax‑depreciation‑amortisation (EBITDA) margin from the current 22 percent to roughly 27 percent by fiscal 2026. Bloomberg’s “AI Showdown” piece underscores that this margin expansion is critical for Alibaba to compete with the higher‑margin cloud businesses of its U.S. rivals, where AI is already a core profit driver.

Strategically, Alibaba is leveraging its massive data moat to train proprietary models that can be commercialised across its ecosystem. The company announced in June that it will allocate ¥15 billion (about $2.1 billion) to a new AI research fund, earmarked for talent acquisition and compute infrastructure, according to Bloomberg’s reporting on the Chinese AI renaissance. This investment is intended to accelerate the rollout of generative‑AI tools for merchants, such as automated copywriting and visual content creation, which the SCMP says have already reduced campaign setup time by 40 percent for early adopters. By embedding these capabilities directly into its marketplace, Alibaba hopes to lock in merchant loyalty and generate recurring subscription revenue, a shift from its historically transaction‑based model.

The market’s focus is now on how quickly Alibaba can translate AI enhancements into top‑line growth. Simplywall.st points out that the company’s forward‑looking earnings guidance has been revised upward three times in the past six months, with the latest consensus forecast projecting a 14 percent year‑over‑year increase in net profit for FY 2025. Bloomberg notes that this optimism is tempered by macro‑economic headwinds, including heightened U.S. tariffs that have pressured Chinese tech stocks. Nonetheless, analysts cited by Bloomberg argue that the AI push could act as a counterbalance, offering a domestic growth engine that insulates Alibaba from external trade shocks. The consensus among the cited sources is that if Alibaba can sustain the observed 12‑percent lift in Singles’ Day conversions and extend similar gains to its broader annual calendar, the company’s earnings trajectory could outpace peers, justifying a narrower valuation gap.

In sum, the convergence of AI‑driven merchant tools, a sizable R&D budget, and improving profitability metrics is reshaping investor sentiment toward Alibaba. While the firm still trails U.S. giants on absolute market‑cap terms, the narrowing price‑to‑sales multiple and the projected EBITDA margin expansion signal that the market is now pricing in a more robust earnings outlook, as highlighted across Bloomberg, SCMP, and simplywall.st. The next earnings season will reveal whether the AI‑centric strategy can sustain the momentum and fully close the valuation disparity that has long defined Alibaba’s standing in the global tech arena.