The narrative surrounding Alibaba Group Holding Limited (NYSE: BABA) has undergone a fundamental transformation in 2025. Once viewed primarily through the lens of a slowing Chinese retail sector, the tech titan is now repositioning itself as the “backbone of the AI era.” A pivotal moment in this shift arrived this week with reports that MiniMax, a rising star in China’s generative AI landscape, is moving forward with a high-profile Hong Kong IPO.
According to reports from Bloomberg, MiniMax has secured Alibaba and the Abu Dhabi Investment Authority (ADIA) as cornerstone investors for its public debut. Seeking to raise over $600 million, the AI startup—known for its sophisticated multimodal models—plans to begin accepting investor subscriptions as early as Wednesday, with a formal listing slated for January 2026. This move, supported by other heavyweight backers like IDG Capital and Mirae Asset, is not just a win for the startup ecosystem; it is a loud signal to the market regarding the intrinsic value locked within Alibaba’s strategic portfolio.
As of late December 2025, Alibaba’s American Depositary Shares (ADS) are trading in the $147.00 to $150.00 range. Despite a recovery from the lows of previous years, the stock remains significantly disconnected from its fundamental growth drivers and its role as a premier AI incubator. For investors looking at the long-term horizon, BABA appears not just reasonably priced, but substantially undervalued.
The MiniMax Catalyst: More Than Just Equity
Alibaba’s participation in the MiniMax IPO is a masterclass in strategic “full-stack” investment. While the financial returns from a successful IPO are attractive, the true value for Alibaba lies in the ecosystem. MiniMax is a pioneer in large language models (LLMs) that generate text, voice, and high-fidelity video. By anchoring this IPO alongside sovereign wealth funds like ADIA, Alibaba is cementing its status as the “cloud of choice” for the next generation of AI unicorns.
The logic is simple: AI startups require immense computational power. Alibaba’s Cloud Intelligence Group has already seen its AI-related revenue achieve triple-digit growth for several consecutive quarters. By investing in MiniMax, Alibaba ensures that the startup’s massive computing needs—required to train and run its models—remain within the Alibaba Cloud ecosystem. This creates a virtuous cycle where Alibaba’s capital investments directly feed its revenue-generating infrastructure.
Valuation: A Stark Disconnect from Fundamentals
To understand why BABA is undervalued, one must look at its current valuation metrics relative to historical norms and sector peers. As of December 29, 2025, Alibaba’s trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio sits at approximately 19.5x to 20.7x. While this is an increase from the depressed levels of 2024 (where it dipped as low as 12x), it remains nearly 40% below its 10-year historical average of roughly 32x.
When compared to its global peers in the technology and consumer cyclical sectors, the gap is even more glaring. While US-based AI leaders trade at multiples often exceeding 40x or 50x, Alibaba—which dominates the cloud market in the world’s second-largest economy—is priced more like a legacy retailer.
Furthermore, the company’s balance sheet is a fortress. With a current ratio of 1.46 and a debt-to-equity ratio of 0.27, Alibaba possesses the financial flexibility to fund its ambitious RMB 380 billion ($53 billion) three-year AI investment plan without straining its operations. The market is currently pricing in significant geopolitical and regulatory risk, while largely ignoring the company’s aggressive share buyback program, which has already reduced the share count by over 5% in the past fiscal year and still has over $19 billion in remaining authorization through March 2027.
The Cloud and AI Growth Engine
The most compelling argument for a “Buy” rating is the acceleration of the Cloud Intelligence Group. In the most recent quarterly reports for late 2025, cloud revenue growth surged to 26% year-over-year, marking its fastest expansion in over three years. This growth is being driven almost entirely by AI demand.
Alibaba isn’t just hosting other people’s models; it is a leader in its own right. Its Qwen 2.5-Max model has consistently outperformed global benchmarks in coding and reasoning, often rivaling or exceeding the performance of Western counterparts like GPT-4 or Claude 3. By integrating these models into its core e-commerce platforms (Taobao and Tmall), Alibaba is boosting merchant efficiency and consumer engagement, which in turn drives Customer Management Revenue (CMR)—up 10% in recent filings.
Analyst Sentiment and Price Targets
The professional investment community is beginning to wake up to this “AI-first” pivot. As of December 30, 2025, the consensus among 20 major analysts tracking the stock is a “Moderate Buy.” The average 12-month price target stands at $194.00, representing a forecasted upside of over 31% from current price levels.
The most bullish analysts see the stock reaching $230.00, citing the “sum-of-the-parts” (SOTP) valuation. If the market were to value Alibaba Cloud as a standalone entity—similar to how Amazon Web Services (AWS) is valued—the cloud business alone could justify a significant portion of Alibaba’s current $350 billion market capitalization, essentially leaving the massive e-commerce and logistics businesses as a “free” bonus for shareholders.
Conclusion: The Strategic Inflection Point
The MiniMax IPO is the “canary in the coal mine” for a broader re-rating of Chinese AI assets. Alibaba’s role as a kingmaker in this space, combined with its internal technological breakthroughs and disciplined capital allocation (buybacks and dividends), makes it a rare value play in a high-growth sector.
The risks—ranging from domestic consumption trends to international trade tensions—are well-known and, arguably, already priced in at a sub-20x P/E. What is not priced in is the potential for Alibaba to emerge as the dominant infrastructure provider for the AI revolution in Asia and beyond.
With a robust dividend yield of approximately 1.3% and a massive buyback cushion, the downside protection is significant. Meanwhile, the upside potential, as the company transitions from an e-commerce giant to an AI infrastructure powerhouse, is immense. For investors seeking exposure to the next leg of the AI race at a “value” price point, Alibaba (BABA) presents a compelling opportunity.