In 2020, Chinese Tech giant Alibaba was flying, trading above $US300/sh on the cusp of IPO’ing Ant Group, Alibaba’s fintech arm, which was set to raise a record $US37 billion. But that came crashing down quickly, following a speech by Jack Ma, Alibaba’s Co-Founder & CEO, in October 2020, where he criticised Chinese regulators, state-owned banks, and the financial system, suggesting they were stifling innovation. The speech did not go down well, and soon after, authorities suspended the IPO and began targeting Jack Ma and Alibaba, with Chinese regulators launching investigations for alleged monopolistic practices. In December 2020, Alibaba was fined nearly $3 billion for anti-competitive behaviour, marking the culmination of a broader effort to rein in the power of big tech companies in China. The impact on the share price was significant, with Alibaba dropping from above $US300 to ~US$60, where it has stayed for several years.
Enter DeepSeek, which shook up global tech in a heartbeat. The impact was significant, and if the power of technology innovation wasn’t already clear to the Chinese administration, it would have been post DeepSeek. The notion that working and supporting Chinese technology rather than curtailing it, is the way to boost the economy as it deflates a bubble in the property market that once drove about a quarter of Chinese growth.
This week was a big milestone that should not be underestimated. Four years after President Xi Jinping launched an assault on Jack Ma, Alibaba and other Chinese tech companies, China’s top leader sat down publicly with Ma and others in a public meeting which we view as a sign the winds of change are blowing towards the private sector, a freer playing field could be in the offing as they look to combat the impact of a US-led trade war.
Alibaba’s share price has benefited from this, along with an announced artificial intelligence partnership with Apple, and has quickly run up to 3-year highs. Importantly, BABA is still incredibly cheap from both a relative and absolute standpoint, and the move could have significantly more left in the tank.
MM is bullish Alibaba (BABA US) & Chinese tech more broadly
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