Analysts Crown Alibaba as the Top Pick in China’s Tech Arena

Alibaba US01609W1027

A significant reassessment of China's competitive e-commerce landscape is underway, with Alibaba emerging as the preferred choice among leading analysts. Morgan Stanley has reshuffled its rankings, placing the tech behemoth ahead of rivals PDD Holdings and JD.com. This shift highlights the company's underlying technological prowess, which has recently been overshadowed by broader market concerns over consumer spending.

Central to this upgraded outlook is a forecast for the intense competitive environment. Market experts at the firm project that the fierce price competition in local services and food delivery will peak in the third quarter of 2025. Following this period, a noticeable market normalization is anticipated.

This expected "rationalization" is seen as a key catalyst for future profit growth. Companies are predicted to move away from margin-eroding discount battles, allowing for healthier financials. This sentiment is bolstered by commitments from both Alibaba and competitor Meituan to pursue more rational competition, aligning with new regulatory guidance on platform governance.

Artificial Intelligence: The Defining Moat

A decisive factor in Alibaba's favor is its identification as China's premier "AI enabler." The successful integration of large language models into core platforms such as Taobao and Tmall is considered a technological advantage that competitors like PDD Holdings and JD.com have not yet matched in scale.

This leadership is beginning to translate into operational metrics, providing a fundamental reason, according to Morgan Stanley, for Alibaba's shares to command a valuation premium relative to its peer group.

Mainland Investors Show Conviction

The analytical confidence appears to be mirrored by the actions of domestic "smart money." Data from the Southbound Stock Connect—the channel enabling mainland investors to purchase Hong Kong-listed shares—shows consistent net buying activity for Alibaba.

While inflows into other tech stocks have been volatile, local investors are using the recent consolidation phase as an entry opportunity. This buying support could help establish a price floor. The stock recently declined to 135.80 euros, and with a Relative Strength Index (RSI) reading of 29.4, it is now technically viewed as oversold.

Key Takeaways at a Glance:

• Top Ranking: Morgan Stanley positions Alibaba first, followed by PDD and JD.com.
• Competitive Outlook: The height of competitive pressure is forecast for Q3 2025.
• Strategic Edge: AI integration is the core differentiating factor.
• Capital Flows: Steady net purchases from mainland investors persist amid volatility.

A Path to Sustainable Profitability

The combination of easing regulatory pressures, a move away from aggressive subsidies, and a clear technological roadmap presents a coherent investment narrative. If the predicted market stabilization materializes in the fourth quarter of 2025, the current focus on profitability is likely to become the critical driver for the company's future valuation.