BABA Alibaba (BABA): Down 30%, Loaded With AI Upside - Is a Parabolic Rally Next?
Alibaba is positioned for an extraordinary comeback, and with the right technical confirmation, this could become one of the most compelling setups in the market right now. The stock being down roughly 30% over the past six months makes it, in our view, one of the highest-quality undervalued AI exposures available today.
On the technical side, the stock recently bounced off its 78.6% Fibonacci retracement of the prior impulse move, around the $92 level.
As of right now, price is running into a triple confluence of resistance: the upper bound of the descending channel it's been trading within since November 2025, the 200-day EMA, and a large horizontal resistance carried over from a multi-year price consolidation. If price can close a weekly candle above all three, that would represent one of the strongest confirmations for a new parabolic rally in Alibaba. A minor resistance may show up near $145, but in our view there's considerably more room to run beyond that level. Momentum is also building on the MACD, adding further weight to the bullish case.
The fundamentals give this technical setup real teeth. Alibaba Cloud revenue accelerated 38% year-over-year in the most recent quarter, with AI-related products now accounting for 30% of external cloud revenue, and Morgan Stanley, which named Alibaba a top AI pick among Chinese tech giants, expects that growth to accelerate further, to 42% in the current quarter and 45% for the full fiscal year. Management's own five-year target is to push cloud and AI revenue past $100 billion in external revenue. A major overhang was also just cleared: Alibaba resolved a $600 million legal dispute with U.S. authorities in a settlement announced July 1, removing a source of uncertainty that had been weighing on investor confidence.
The bigger story behind the AI angle is cost. Chinese AI labs, Alibaba's Qwen among the leaders, have driven inference costs down dramatically versus their U.S. counterparts, in some cases by 90% or more, using techniques like sparse mixture-of-experts architectures and aggressive context caching.
The practical result: as U.S. companies face ballooning AI compute bills, a growing number are routing routine workloads to cheaper Chinese models and saving the expensive frontier models only for tasks that truly need them. It's the AI equivalent of not needing a Ferrari to pick up groceries, you don't need the most expensive model on the market for every task, just the one that's good enough for the job at a fraction of the cost. That dynamic plays directly to Alibaba's strength as both a leading low-cost model provider and the cloud infrastructure those workloads run on.
Multiple signals are lining up here, the Fibonacci bounce, accelerating cloud/AI growth, a cleared legal overhang, and a structural cost advantage in the global AI race. We're watching for that weekly close above the triple resistance confluence before treating this as confirmed, until then, it's a high-conviction setup, not yet a trade.
ノート
If price respects this strong resistance the path towards the next support at $85 opens and we re-analyse
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