2024 was an excellent year for the stock market as many companies delivered respectable returns to investors. As 2025 begins, investors are looking for opportunities that can deliver solid long-term growth while remaining resilient in a rapidly evolving market.
One company that could make it onto investors' radar is Alibaba (BABA -0.94%), a leading tech giant based in China. With its dominant position in e-commerce, cloud computing, and fintech, Alibaba could be a stock worth buying and holding for the next five years.
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A widely diversified tech conglomerate
It is no secret that Alibaba has always been the bedrock of the Chinese e-commerce industry, even as it has faced competition from existing and newcomers like JD.com or Pinduoduo. As of this writing, it owns about 46% of the e-commerce market share in China. But beyond e-commerce, Alibaba is also a major player in industries including cloud computing, logistics, fintech, and others.
Take Alibaba Cloud, for example. It is the most significant player in China, with a 36% market share, and in the Asia Pacific region, with a 19.6% market share. Similarly, Alibaba's logistics arm, Cainiao, is one of the key players in the Chinese logistics industry and also owns a cross-border logistics delivery business that helps merchants on international platforms like AliExpress and Tmall Global sell globally.
Alibaba's diversified business model reduces reliance on any single revenue stream, mitigates risks from market-specific challenges, and positions Alibaba to capitalize on emerging opportunities globally. For instance, Alibaba has been growing its international e-commerce business in recent years as its Chinese e-commerce business, while dominant, is a mature business with slower growth rates. In the three months that ended Sept. 30, 2024, the international business delivered 29% growth, while the Chinese e-commerce business grew at just 1%.
Also, such diversification offers stability, especially when weathering volatile economic conditions. This offers better comfort to investors, knowing that the tech giant's earnings will remain resilient even during challenging market conditions.
Rising with artificial intelligence (AI)
One of the biggest complaints investors have about Alibaba is its slowing growth rates. Due to its huge success in the past, the giant is finding it much more difficult to sustain its historical growth rates.
While there are some truths in this, there are still forces that the tech company can leverage to sustain its long-term growth. One huge trend that could transform Alibaba's prospects is the development of AI.
The most apparent opportunity AI will bring to Alibaba is its cloud computing business. The rise of AI will lead to exponential growth in demand for cloud computing infrastructure as businesses require scalable and efficient solutions to train AI models and deploy intelligent applications. As China's largest cloud computing provider, Alibaba Cloud is well positioned to leverage its innovative technologies in areas like large language models (LLMs) and its scaled infrastructure to offer customers affordable solutions.
Besides, the ongoing development of AI technology will lead to new business opportunities in areas like autonomous vehicles, robotics, smart cities, etc. Alibaba Cloud can leverage its existing resources and market position to grow in these new areas.
Even Alibaba's existing e-commerce business could see a boost as the company incorporates new AI technologies for transformation. For instance, generative AI tools like automated customer service and advanced AI-driven recommendations could improve customer experience, leading to higher customer conversion, satisfaction, and retention. Moreover, using AI will improve operational efficiency in areas like fulfillment and logistics, leading to better cost control and margins.
What it means for investors
The last few years have been challenging for Alibaba as it faced multiple challenges, such as a crackdown by the Chinese government and slower growth. Unsurprisingly, most investors have shunned Alibaba's stock, which explains the massive fall in share price -- more than 70% from its peak of $310.
Still, it's too early to write off the tech giant, especially as the new management team tirelessly works to turn around the ship by improving customer experience and investing in AI. If successful, Alibaba could enter a new chapter of growth again.
As a shareholder, I think there's a good chance it will succeed in its efforts.
