Investors looking for both strong business growth and massive addressable markets often end up at two familiar names: Amazon (AMZN 4.22%) and Alibaba (BABA -3.96%). Each has a powerful commerce engine, a fast-growing cloud platform, and a significant opportunity in AI infrastructure and applications.

But when you strip away headlines and focus on the operating results and the playbook for the next few years, one option stands out as the clear winner.

Amazon: broad-based, profitable growth

Amazon’s latest quarter showed healthy top-line growth and strong profit execution. Revenue rose double digits, with both its North America and international year-over-year growth rates in top-line revenue accelerating significantly, and Amazon Web Services (AWS) expanding at a rate of nearly 18% year over year. Operating income climbed sharply as the company continues to drive efficiency across fulfillment and cloud. It’s the kind of combination long-term investors want: growth with expanding earnings power.

Furthermore, AWS’s momentum and scale are extraordinary. The cloud-computing business’s annualized revenue run rate is now just over $123 billion. The business has powerful momentum in AI. For generative AI solutions, specifically, Amazon CEO Andy Jassy said in its second-quarter earnings call that it is growing sales by a triple-digit year-over-year percentage and has “more demand than we have supplied for at the moment.”

Highlighting the benefit of Amazon’s scale, the cloud computing segment’s operating margin remains robust — at 32.9% (adjusted to exclude the impact of foreign exchange headwinds) in Q2 — even as Amazon steps up investment in data centers, networking, and accelerators to meet AI demand.

Meanwhile, Amazon’s online store segment, where the company records e-commerce sales, grew by 11% year over year in Q2 — up from 5% growth in Q1. Similarly, the company’s high-margin advertising business clearly accelerated because Amazon’s other revenue segment, which primarily consists of advertising sales, grew 19% year over year in Q2 — up from a growth rate of 4% in Q1.

Alibaba: A cheaper valuation — but for a reason

Alibaba’s latest quarter gave investors a clear (and bullish) data point: accelerated cloud growth and the stock ripped higher. Revenue in its cloud intelligence segment rose 26% year over year, powered by an eighth quarter in a row of triple-digit year-over-year growth in AI-related product revenue.

The overall picture of Alibaba’s business, however, is more nuanced. Total revenue increased just 2% year over year, or 10% when excluding sales in the year-ago quarter from recently sold businesses. Further, Alibaba’s adjusted earnings before interest, taxes, and amortization (EBITDA) fell 14% year over year as the e-commerce and cloud-computing company leaned into what it calls “quick commerce,” or ultra-fast delivery, broader user experience investments, and AI. These heavy investments also meant that free cash flow went from positive in the year-ago quarter to negative.

A clear winner

Both stocks could end up being long-term winners. But Amazon ultimately offers the better risk-reward.

Alibaba is cheaper on traditional valuation multiples (but more expensive than it used to be after its recent sharp move higher) and is returning significant capital via buybacks and dividends. This lower valuation helps make up for the company’s lower growth and some of the risks associated with China’s weak macroeconomic backdrop. Indeed, given how cheap the stock’s valuations is (it currently trades at just 15 times earnings), Alibaba could end up being a bargain in hindsight. But only if China’s economy picks up speed and consumer and enterprise spending reaccelerate. If this happens, the upside in the stock price could be massive. But the company still has some things it needs to prove to investors to command a higher valuation multiple; it needs to demonstrate scalability, shown by operating margin expansion and free cash flow improvement, as Alibaba grows. We’re not there yet.

Ultimately, Amazon offers the cleaner, more reliable setup. The company has three growth vectors that reinforce one another: retail, advertising, and cloud — and each of these drivers will likely contribute substantially to Amazon’s business in the coming years. Retail keeps getting faster and more convenient, ads help further monetize the company’s e-commerce customers, and AWS offers investors a fast-growing, high-margin catalyst for the business. Together, Amazon’s broad-based catalyst of scaled and profitable business segments provides investors with more certainty when thinking about the company’s long-term potential.

If I had to pick just one of these two growth stocks today, I’d choose Amazon — despite its higher valuation of about 35 times earnings. The operating momentum is better, the AI strategy is tied to an already scaled platform, and the cash generation gives the company room to invest through cycles. Alibaba is investable and improving, but the execution bar (and ultimately the risk) is higher.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Alibaba (BABA 1.06%), the largest e-commerce and cloud company in China, went public at $68 per share on Sept. 18, 2014. It raised $25 billion, making it the largest IPO in history at the time, and it held that record until Saudi Aramco’s $29.4 billion IPO in 2019.

Alibaba’s stock closed at a record high of $310.29 on Oct. 27, 2020. That marked a 356% gain from its IPO price. At the time, investors were dazzled by the robust growth of its e-commerce and cloud businesses, as well as its rapid expansion into adjacent markets.

But today, Alibaba’s stock trades at about $114. China’s antitrust regulators cracked down on Alibaba’s e-commerce business by forcing it to ax exclusive deals with merchants, rein in its promotions, and seek regulatory approvals for all its future investments and acquisitions. All of that pressure, along with a record $2.8 billion fine, eroded its defenses against aggressive competitors including PDD and JD.com.

At the same time, China’s soft economic growth forced many companies to rein in their cloud spending. Alibaba also scrapped a long-awaited IPO for its fintech affiliate Ant Financial in 2020, and it also walked back plans to spin off cloud, logistics, and Freshippo grocery units in 2023 and 2024. Investors sensed its high-growth days were over, and its stock stumbled. Those setbacks were worrisome, but can Alibaba’s stock bounce back over the next 10 years?

What are Alibaba’s core growth engines?

Alibaba splits its business into seven groups. The Taobao and Tmall Group hosts its two largest online marketplaces in China, the Alibaba International Digital Commerce Group handles its overseas and cross-border e-commerce marketplaces (including Lazada in Southeast Asia, Daraz in South Asia, Trendyol in Turkey, and AliExpress for its overseas customers), and the Cloud Intelligence segment houses its cloud infrastructure platform and related AI services.

Alibaba’s Cainiao group provides both first-party and third-party logistics services, its Local Services group provides localized delivery services within China, and its Digital Media and Entertainment Group handles streaming video, audio, and film production businesses. Lastly, the “All Others” segment operates the company’s brick-and-mortar stores and non-core digital platforms.

In fiscal 2025, which ended this March, Alibaba’s revenue rose 6%. All seven of its groups grew year over year, while its international digital commerce, cloud intelligence, and local services groups posted double-digit revenue gains.

Data source: Alibaba. YOY = Year-over-year.

What are Alibaba’s near-term catalysts?

Alibaba expects its overseas e-commerce marketplaces, cloud infrastructure platform, and ongoing upgrades for Qwen, a new family of large language models for new generative AI applications, to fuel its near-term growth. The company’s AI-related revenue could surge over the next few years as more companies upgrade their AI capabilities.

As for its core Chinese e-commerce business, Alibaba plans to upgrade Taobao’s live streaming features and peddle more discount goods to keep up with PDD and ByteDance’s Douyin, known as TikTok overseas, as the macro headwinds curb consumer spending. This segment won’t become a roaring growth engine again, but its stabilization is crucial for Alibaba’s future. China’s economy could also stabilize and grow again if it reaches a mutually favorable trade deal with the United States.

What are Alibaba’s long-term catalysts?

Since Alibaba no longer plans to spin off most of its groups as independent companies, observers might see the company integrate its cloud, AI, logistics, delivery apps, and brick-and-mortar stores more deeply into domestic and overseas e-commerce marketplaces. It could also roll out more advertising and e-commerce services across its own digital media ecosystem — which includes the streaming video platform Youku, its streaming music service AliMusic, and its AliOS smart TV platform.

In other words, Alibaba’s high-growth days might be over, but its businesses could converge and drive growth as a diversified retail and tech giant.

According to Mordor Intelligence, the Chinese e-commerce market could still expand at a CAGR of 10% from 2025 to 2030. Grand View Research expects China’s public cloud market to grow at a CAGR of 23% from 2024 to 2030. Staying at the top of these two markets, even as a maturing leader, could ensure its long-term growth.

Those secular trends indicate Alibaba still has plenty of room to grow, even if it faces challenging macro, competitive, and regulatory headwinds. Conservatively assuming it grows EPS at a CAGR of 10% from 2025 to 2035, and its stock still trades at 11 times forward earnings by the beginning of the final year, Alibaba’s price could more than double to about $257 over the next decade. That would be a decent gain, but it would still be well below its all-time high from 2020.

Stocks opened sharply lower on Thursday, following the official rollout of higher-than-expected U.S. tariffs on imports. There’s no shortage of companies and consumers that will suffer from the inflationary pressures or rising input costs. However, there are some stocks likely to tumble in the aftermath of the new normal that should hold up better than the downticks suggest.

Alibaba (BABA -0.42%) joined the majority of stocks opening lower on Thursday morning. On the surface, it makes sense. It’s an e-commerce pioneer in China, one of the more prominent targets in the trade war. If you’ve ever bought from Chinese sites that offer eye-rubbing low prices, you have probably come across Temu, Shein, and Alibaba’s own entry, AliExpress.

Reality is kinder than the knee-jerk reaction, though. Let’s delve into why Alibaba could be a no-brainer buy following the tariff-related pullback in its stock price.

Going with the flow

It may surprise you to learn that Alibaba has actually been one of this year’s best performers. There are just nine stocks trading on U.S. exchanges with market caps north of $10 billion that have soared at least 50% this year. Alibaba isn’t just one of them — the Chinese e-tailer is the most valuable listed stock to have risen by more than 50% in 2025, with a market cap of $310 billion.

The stock’s 56% surge through the first three months of this year may seem surprising. President Donald Trump has upped his beef with the world’s second most populous nation. President Biden also circled China as a target last year, and Alibaba delivered double-digit returns to investors n 2024.

Alibaba is far removed from its all-time highs. The shares are down roughly 60% since peaking in late 2020. The past year and change of positive trading activity — Alibaba has nearly doubled since bottoming out 15 months ago — suggests that this is an investment built for meeting today’s challenging operating climate.

How can this be? What about the tariff impact on AliExpress?

Alibaba has spent the last few years widening its global reach. Its business selling outside of its home country is growing faster than its domestic gains, but China itself still represents more than 85% of the company’s sales. Perhaps more importantly, its domestic business accounts for more than 100% of its profitability.

The $5.2 billion in sales generated by Alibaba’s international e-commerce business in its latest quarter — 13% of the $38.2 billion it clocked on the top line — came on negative adjusted earnings before interest, taxes, and amortization. The business rose at a hearty 32% clip, compared to a more modest 5% year-over-year increase for the balance of its business. It’s still a drag on Alibaba’s bottom line.

Shopping for resiliency

Alibaba’s business has exploded 250-fold in the last 15 years but is a slow mover these days. It has posted just one quarter of double-digit revenue growth over the past three years.

AliExpress taking a hit from U.S. shoppers won’t help, but that’s just one country of profit-draining operations in what is a small tile within Alibaba’s larger mosaic. AliExpress sells in Europe, Asia, and the rest of North America.

The new trade war pits U.S. consumers against the rest of the world, but between the rest of the countries, it will be just business as usual. If anything, the new normal may solidify those trade channels outside of the U.S. market for Alibaba. It may even come to the point where its international operations can finally stop being a drag on Alibaba’s bottom line. It’s not as if Alibaba was sourcing its goods from the U.S., the one market that will face inflationary pressures with its import tariffs.

The e-commerce behemoth behind China’s Taobao, Tmall, and even a cloud intelligence business that’s growing at a double-digit percentage clip will find ways to stand out. In the meantime, the stock is probably cheaper than you think for an investment that has nearly doubled since January 2024.

Alibaba is trading for just 14 times this year’s adjusted earnings target and less than 13 times next year’s forecast. These are low multiples for a dynamic leader that has thrived with consistently positive annual revenue growth since launching 25 years ago. It’s a consumer-facing company that should buck the malaise that its U.S. peers could be facing in the coming months.

Stocks of several of China’s most popular technology companies were rallying on Wednesday as the country’s leader promised to support the technology industry and kept its economic growth goals intact.

With that as a backdrop, some of China’s favorite stocks outpaced the gains of the broader market. Shares of Alibaba (BABA 8.16%) surged 7.7%, JD.com (JD 6.23%) climbed 5.7%, and Tencent Holdings (TCEHY 6.45%) rose 5.3% as of 12:50 p.m. ET. There wasn’t any company-specific news fueling the gains, which suggests the comments made by the country’s leader helped drive the stocks higher.

National People’s Congress gets underway

The National People’s Congress is China’s week-long political event and one of the government’s most important annual gatherings. To kick off the meeting, Chinese Premier Li Qiang announced support for the country’s most important emerging industries, particularly in the technology space. “We will establish a mechanism to increase funding for industries of the future and foster industries such as biomanufacturing, quantum technology, embodied artificial intelligence (AI), and 6G technology,” he said.

This show of support was something of a surprise to market watchers and sparked a broad-based rally among China’s most widely followed technology stocks. The MSCI China Index, which represents some of the country’s most well-known large-cap and mid-cap stocks, jumped 2.7% on the news, helping to stoke investor sentiment. This added to the index’s robust performance so far this year, as it has gained 21% since its January low.

Additionally, China kept its economic growth target of 5% intact despite the Trump administration’s tariffs and the increasing concerns of a protracted trade war. China’s willingness to stand by its projections was taken by market watchers to suggest the country is planning to provide additional economic stimulus, particularly to support ongoing developments in AI and quantum computing.

Chinese AI start-up DeepSeek made headlines in late January with the release of its R1 reasoning model, which it claimed could go head-to-head with OpenAI’s o1 model at a fraction of the cost. Many experts have since questioned claims that DeepSeek’s model cost just $5.6 million to develop, with recent estimates suggesting it was closer to $1.6 billion.

The advancements were impressive, nonetheless. Nvidia CEO Jensen Huang said the model was “an excellent innovation” and went so far as to describe it as “a world-class reasoning AI model.”

Why it matters

So, what does all this mean for our trio of Chinese tech stocks? Plenty, as it turns out.

These companies are widely regarded as AI darlings in China. Alibaba’s stock has surged 73% since its low in mid-January (as of this writing). JD and Tencent have also been firmly in rally mode, with the stocks up 41% and 30%, respectively, during the same timeframe. Recent developments suggest there could be more to come.

• Reports emerged that Alibaba is working with Apple to roll out AI features in China.
• JD announced a host of AI-powered enhancements to its JD Cloud offering while providing its cloud customers with free access to many of China’s most popular large language models to create their own AI systems.
• Tencent recently released a new AI model that it says rivals DeepSeek’s R1 in performance while providing faster response times.

Heading into this year, China’s AI tech leaders had lagged many of their U.S.-based counterparts, with Tencent, JD, and Alibaba gaining 41%, 20%, and 9%, respectively, in 2024. However, Beijing signaling support for China’s home-grown AI efforts gave investors confidence that this year’s tech rally has only just begun.

These stocks are currently selling at compelling valuations. Even after the recent rally, Tencent, Alibaba, and JD.com are selling for 16 times, 12 times, and 11 times trailing-12-month earnings, respectively — which are reasonable multiples given their potential for future growth, particularly since they appear to have the backing of the Chinese government.

Chinese stocks tend to be a bit riskier, but for investors with the appropriate long-term outlook and an interest in investing in China, now might be a good time to pick up shares of these stocks before they run higher.

Danny Vena has positions in Apple, JD.com, Nvidia, and Tencent. The Motley Fool has positions in and recommends Apple, Nvidia, and Tencent. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.