Alibaba Is Spending Billions to Scale Up Its Data Centers. Is It Time to Buy BABA Stock Now?

Alibaba (BABA) is doubling down on areas that could define its next chapter of growth, particularly artificial intelligence (AI) and global expansion. The Chinese technology giant is raising $3.2 billion through convertible senior notes, with most of that capital earmarked for scaling its cloud infrastructure.  The market has responded with enthusiasm as Alibaba shares closed 8% higher on Sept. 11.

Notably, Alibaba stated that about 80% of the proceeds will go toward expanding data centers, upgrading technology, and enhancing services to meet the surging demand for AI-driven solutions. The remaining 20% will be used to expand international commerce operations, where Alibaba continues to see opportunities to increase efficiency and broaden its global presence.

Alibaba’s emphasis on cloud and AI is timely. AI has become one of the most powerful growth engines in the technology sector, and Alibaba’s Cloud Intelligence division is already seeing the benefits of this trend. By enhancing its cloud and AI capabilities, Alibaba could capture a larger share of this rapidly expanding market. During the last quarter’s conference call, BABA’s management said that while efficiency remains a priority across its businesses, investment in AI will enable it to gain a competitive edge and drive its growth in the long run.

This pivot is also strategic in light of Alibaba’s broader business environment. The company continues to benefit from China’s consumption growth through its core e-commerce business, but rising competition could limit momentum in that segment. Against this backdrop, cloud services and global commerce stand out as critical growth drivers, offering diversification and resilience for the company’s future.

While the push into AI-powered cloud services offers compelling upside potential, is much of the optimism already priced in BABA stock? Alibaba stock has surged roughly 80% year-to-date, making valuation an important factor to consider.

Here’s What BABA Stock’s Valuation Indicates

Alibaba is investing heavily in strengthening its core e-commerce operations while also expanding its presence in AI and cloud computing. These strategic bets are expected to squeeze margins and earnings per share (EPS) in the short run, with analysts projecting a dip in Alibaba’s bottom line for fiscal 2026.

Further, with growth momentum building and a sharper focus on efficiency, Alibaba is positioned to see a strong rebound in profitability. Wall Street forecasts that by fiscal 2027, the company’s earnings could surge more than 35%. Such a sharp acceleration in earnings growth justifies the current valuation, with BABA trading at a forward price-earnings multiple of about 19.5 times.

Is It Time to Buy BABA Stock?

Alibaba’s latest earnings report highlights that its cloud business is emerging as the key growth engine for fiscal 2026 and beyond. In the first quarter, cloud revenue growth accelerated to 26%, with demand from external customers surging as more companies tapped public cloud services to power their AI workloads.

Notably, revenue from AI-related products has grown at a triple-digit pace for eight consecutive quarters, reflecting that the adoption is broadening and accelerating. Furthermore, demand is not only driving the development of new AI-specific services, but also breathing new life into traditional offerings, such as computing and storage. Essentially, AI adoption is acting as a key catalyst lifting multiple areas of Alibaba’s business.

The company’s customers are leveraging advanced AI models to develop new applications, while also refining existing ones. In many cases, functions once handled by traditional CPU-based systems are now being taken over by large-scale AI models. This shift offers significant growth opportunities for Alibaba.

While training workloads have traditionally dominated, Alibaba has seen reasoning demand accelerate alongside them, creating a dual engine of growth for its cloud division. Alibaba is pouring billions into expanding its cloud and data center infrastructure, implying it remains well-positioned to capitalize on the significant growth opportunity led by AI.

Alibaba stock has already run up significantly, but the company’s cloud and AI bets may only be scratching the surface, and it could deliver significant growth ahead, making its stock a “Buy.” Wall Street analysts share this optimism as BABA stock currently carries a “Strong Buy” consensus rating.