Alibaba's AI Division Grew Exponentially for Nine Consecutive Quarters—Here's Why the Market Is Still Sleeping on It

The Hidden Growth Story Behind the Revenue Numbers

When Alibaba Group (NYSE: BABA) released its Q3 earnings, the headline revenue figure seemed underwhelming at first glance—a mere 5% increase to $34.8 billion. Yet beneath the surface lies a far more compelling narrative. Strip away recently divested assets, and the actual growth rate jumps to 15%. More significantly, the company’s AI-driven revenue has grown by triple digits for nine straight quarters, a remarkable achievement that continues to fly under the radar of many investors.

This paradox exists because Alibaba’s AI operations, while experiencing explosive expansion, still represent a relatively modest portion of the company’s total business. The sheer scale of the overall enterprise means AI can post triple-digit gains without dramatically moving the needle on total revenue—for now.

Where AI Growth Is Actually Accelerating

The real action is happening in Alibaba’s cloud intelligence segment, which posted 34% growth last quarter and stands as one of the company’s fastest-expanding divisions. While Alibaba doesn’t separately break out AI as a financial segment, both its cloud infrastructure and e-commerce units are increasingly powered by AI investments.

The company has been methodical in its approach: developing proprietary chips and collaborating with Apple to integrate AI capabilities into iPhone products. These aren’t incremental improvements—they’re foundational shifts that position Alibaba as a serious contender in the global AI race, not just a Chinese player with regional appeal.

A Valuation Disconnect in a Frothy Market

The stock has surged approximately 87% year-to-date as of late November, yet it trades at a price-to-earnings multiple of just 21. Compare that to the Technology Select Sector SPDR, where the average tech stock commands a 41x earnings multiple. For a company posting triple-digit AI growth, this valuation gap is striking.

Growth investors typically throw premium valuations at AI-exposed companies without hesitation. Alibaba’s more modest multiple reflects lingering skepticism rooted in geopolitical concerns rather than business fundamentals. The discount persists despite the company’s demonstrated execution and scale.

The Long-Term Context That Matters

Over the past five years, Alibaba stock is down 40%—a fact that underscores how much investor caution has surrounded the company due to geographic and regulatory uncertainties. Yet the business fundamentals tell a different story. Alibaba remains a dominant force in e-commerce and is now building what could become one of Asia’s premier AI operations.

The Chinese market itself represents an enormous opportunity. With Alibaba as one of the region’s leading tech enterprises, exposure to AI-driven growth in that ecosystem could deliver substantial returns. For U.S.-based portfolios, it also serves as meaningful geographic diversification beyond the concentration in American mega-cap tech stocks.

Weighing Risk Against Opportunity

Government interference remains a legitimate concern—it’s the primary reason why Alibaba trades at a discount despite its growth metrics. This risk is real and shouldn’t be dismissed. However, the company has repeatedly demonstrated its ability to operate successfully within China’s regulatory environment while building world-class technology capabilities.

At its current valuation and with triple-digit AI revenue growth now in its ninth consecutive quarter, Alibaba presents an intriguing opportunity for investors seeking exposure to AI trends outside the saturated U.S. tech market. The stock has the potential to reward patient shareholders who can tolerate geopolitical uncertainty in exchange for growth that remains largely overlooked by the broader market.