Alibaba (BABA) Bulls Rejoice as U.S.-China Trade War Nears Ceasefire | Markets Insider
Alibaba (BABA) is currently seen as a contrarian growth play among Western investors, mainly due to ongoing U.S.-China trade tensions. However, I believe that sentiment is likely to shift in the coming months, and when it does, Alibaba is well-positioned to be one of the key beneficiaries.
Now trading around the key psychological level of $100 per share, Alibaba has nearly 50% upside over the next 12 months, according to Wall Street consensus. The message is clear: for investors who believe U.S.-China trade tensions are easing—and that the tariff concerns were overstated from the start—taking a bullish position in BABA stock is a logical move. Buying near the $100 intramonth lows and watching the stock climb toward $150 within a year presents a compelling opportunity for short-medium term opportunistic investors.
When I look at Alibaba today and set aside the macro noise, what stands out is a fundamentally undervalued tech powerhouse. As China’s largest tech conglomerate, Alibaba operates across a wide range of high-growth sectors—including e-commerce, cloud computing, digital payments, logistics, and AI-driven services.
The valuation case is hard to ignore. Alibaba trades at a forward non-GAAP P/E of just 11, significantly below the sector average of 18. Its forward diluted EPS growth rate is 8.4%, compared to 6% for the broader industry. By traditional metrics, this positions Alibaba as clearly undervalued—a strong foundation for any investment thesis.

Add investor sentiment to the equation, and the opportunity becomes even more compelling. Western investors, who control a large share of global capital, have remained hesitant due to ongoing geopolitical tensions and perceptions of anti-Western sentiment in China. But that sentiment may be shifting.
The U.S. has reasserted its global influence, and while friction under Donald Trump’s second term has been pronounced, recent trade de-escalation and diplomatic signals point toward a possible turning point in U.S.-China relations. If sentiment continues to improve, Alibaba is well-positioned to benefit meaningfully from the rebound.
Major investors have been quietly accumulating shares of Alibaba, signaling growing confidence in the stock despite ongoing geopolitical concerns. Notably, Bridgewater—led by the legendary Ray Dalio—has made Alibaba its fourth-largest holding, now accounting for roughly 3.5% of its portfolio. The market is clearly applying a “geopolitical discount” to Chinese equities, but savvy investors are choosing to look beyond the headlines and place their bets on a more stable global outlook. I count myself among them.
The shift in sentiment is also visible in the data. During the height of Trump’s trade war rhetoric in March and April, Chinese equities saw $3.8 billion in outflows. By May, however, that trend had reversed, with $402 million in inflows following signs of diplomatic thawing. According to TipRanks’ price data, BABA has outperformed U.S. benchmarks like the S&P 500 (SPX) despite the trade war rhetoric being ramped up every week.
Optimism around a so-called “ceasefire” is very real, and there’s reason to believe it could persist. Trump has every incentive to maintain stability with China; a breakdown in diplomacy that leads to a Taiwan conflict would crash the markets and tarnish his legacy. A stable China-U.S. relationship benefits everyone, including investors.
From a valuation standpoint, Alibaba remains compelling. A re-rating from its current 11x forward earnings to a more normalized 15–20x range could drive the stock up 50% or more. That’s entirely reasonable if Alibaba delivers on the consensus estimate of 15% normalized earnings growth for Fiscal 2027.
By comparison, Amazon (AMZN) is forecast to grow EPS by 20% and trades at a forward P/E of 36. If Alibaba can close even a small portion of that gap, it will likely close the valuation gap as well.
The reality is, I don’t think the market has fully recognized Alibaba’s upside potential yet, though analysts clearly have. The valuation re-rating I’ve been highlighting hasn’t materialized, despite early signs that Chinese equities are starting to emerge from the shadows. Alibaba’s 35% gain over the past 12 months is impressive, yet the recent 12.5% pullback in the past month presents a compelling entry point. As the saying goes, be greedy when others are fearful.
The stock price is currently trading moderately above the 50-week and 200-week moving averages, and the 14-week RSI (Relative Strength Index) is at 45, so this is at the very least fair value, and from the perspective of the fundamentals, a deep undervaluation.
That’s why I think Alibaba is primed to buy, no matter how you look at it, as long as you can get over the macro fears around the U.S.-China relationship, which has to ease—the alternative is too severe for geopolitical figures to even seriously consider. Diplomacy seems to be the only path forward.
On Wall Street, Alibaba has a consensus Strong Buy rating based on 14 Buys, one Hold, and zero Sells in the last three months. BABA’s average stock price target of $156.43 indicates a 46% upside potential over the next 12 months.

Even the most conservative analyst estimate puts Alibaba at $130, implying nearly 25% upside from the current price of around $105. In other words, it’s hard to see a bad outcome here. This is a classic case of a fundamentally strong stock being mispriced due to macro-driven noise.
For Alibaba, the main downside risk lies in escalating China-U.S. tensions. However, even in the unlikely event of a full-scale conflict—given ongoing diplomatic efforts—U.S. equities would also suffer significantly. This creates a strong incentive for both nations to maintain peaceful relations, in which case Alibaba stands to benefit over the coming year.
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