With gains of 70% last year, Alibaba (BABA) outperformed U.S. tech stocks by a wide margin. Incidentally, the returns were higher than Alphabet (GOOG) (GOOGL), which was the best-performing “Magnificent 7” stock in 2025. The Chinese tech giant has continued its good run in 2026 and is already up nearly 16% for the year, which is well ahead of what the average U.S. tech stock has delivered.
In my previous article, I had noted that Alibaba’s risk-reward for 2026 looked favorable despite the rally. With the stock now building on the gains, let’s explore whether there’s more to the BABA growth story this year.
Both positive macro developments and company-specific news have helped drive BABA stock higher this year. On the macro level, China announced an investigation into competition among food delivery companies amid an escalating price war. Alibaba is among the companies that operate food delivery platforms in China and has been incurring substantial losses in this business as competitors try to lure customers with subsidies. Alibaba, which has burned billions building that business, unsurprisingly welcomed the move. Curbs on an industry-wide price war would help platforms lower, if not outright eradicate, the cash burn.
Moreover, China’s 2028 action plan places a lot of emphasis on artificial intelligence (AI). The country has come a long way since 2020, when it cracked down on tech companies, with Alibaba being the poster child of the crackdown. Cut to 2026, and China is backing its tech companies as the U.S. and China strive for global AI dominance.
Being a planned economy—unlike the U.S., where things are largely determined by the market—China often picks up industries that it sees as strategically important and frames policies for their development. New energy vehicles (NEVs) are a case in point, as the government’s supportive policies helped drive adoption, and six out of every 10 cars sold in the communist country are now from the category that includes both battery electric and hybrid cars.
Alibaba is the leading AI play in China, as I have discussed in previous articles, and stands to benefit from the country’s supportive policies. The company’s AI strategy is yielding results, and reports suggest that the downloads of its Qwen AI models have topped 700 million. Incidentally, Alibaba is going global with its AI initiatives and has announced data centers globally in countries like France, the UAE, Brazil, and Japan.
