Alibaba shares rallied this morning after China announced a new action plan aimed at accelerating artificial intelligence adoption in manufacturing.
The initiative, called "AI+ Manufacturing," will fund thousands of Beijing's "little giant" startups to help them invest more in research and development.
Even after today's surge, Alibaba stock remains down more than 11% compared to its 52-week high.
Beijing's new action plan is seen as a material catalyst for Alibaba stock because it transforms the company from a consumer app specialist into an essential industrial backbone.
Under the "AI+ Manufacturing" initiative, China has committed to accelerating AI adoption to 70% within the next two years, which will require over 50,000 factories to invest in cloud and AI services.
As the market leader, Alibaba Cloud stands to benefit significantly from this migration.
This strategic alignment signals the end of the tech crackdown, repositioning Alibaba as a national champion critical to China's economic goals.
Alibaba shares are also attractive because the company's flagship large language models, Qwen, are seeing rapid adoption across enterprise and consumer verticals.
Cumulative downloads on Hugging Face have surpassed 700 million, after a strong December where Qwen exceeded the combined total of the next eight most-used large language models.
Alibaba is trading at 26 times forward earnings, offering exposure to artificial intelligence at an attractive price.
The NYSE-listed firm continues to generate solid cash flow from its e-commerce segment while growing its presence in the higher-margin cloud and AI business.
A 0.63% dividend yield makes Alibaba appealing as a long-term holding for income-focused investors.
Wall Street analysts continue to view Alibaba shares as an undervalued Chinese tech opportunity.
According to Barchart, the consensus rating on Alibaba stock is currently "Strong Buy" with a mean target of about $200, indicating potential upside of roughly 20%.