Alibaba Group Holding Ltd - ADR

Alibaba was the largest positive contributor to the fund in July, with its share price up nearly 30%. This performance was driven by the announcement of a powerful yet cheap new Chinese AI model, Kimi K3, which was trained using Alibaba’s cloud technology. The exceptional asymmetry on offer in many of the assets the fund currently holds means small changes in news flow or fundamentals can lead to outsize positive performance, highlighting Alibaba's strong position in the AI sector and its potential for future growth.

Alibaba was the largest positive contributor to the fund in July, with its share price up nearly 30%. This performance was driven by the company's cloud technology, which was utilized in the development of a powerful yet cheap new Chinese AI model, Kimi K3. The exceptional asymmetry on offer in many of the assets the fund currently holds means small changes in news flow or fundamentals can lead to outsize positive performance, highlighting Alibaba's strong position in the market.

Alibaba is strategically redirecting capital into AI infrastructure, which is expected to enhance its competitive advantage. Despite near-term profitability challenges, segments tied to AI, such as customer management revenue and Cloud, are showing growth, with Cloud's external revenue increasing by 40%. The management's recent disclosure of AI product revenue at an annualized run rate of approximately $5.3 billion and the approval of Alibaba's Qwen as a technical partner for Apple Intelligence further solidify its position as a leading AI platform in China. This shift indicates that Alibaba may possess both the infrastructure and technology to compete effectively in the AI space.

Alibaba's quarterly results showed cloud revenue growth accelerating to 38% year-over-year, supported by increasing adoption of AI-related services. Management indicated that earnings headwinds are beginning to stabilize and that losses in quick commerce are improving as unit economics strengthen. Our conversations with the company suggest Alibaba's cloud position remains very well positioned, with enterprises continuing to demand full-stack services. Execution on core commerce is improving, and management's comprehensive AI strategy is beginning to show results. We remain confident in the improving execution in Alibaba’s core businesses and growing AI adoption.

Alibaba's quarterly results showed cloud revenue growth accelerating to 38% year-over-year, supported by increasing adoption of AI-related services. Management indicated that earnings headwinds are beginning to stabilize and that losses in quick commerce are improving as unit economics strengthen. Our conversations with the company suggest Alibaba's cloud position remains very well positioned, with enterprises continuing to demand full-stack services. Execution on core commerce is improving, market share is stabilizing, and management's comprehensive AI strategy is beginning to show results.

Despite a near-term earnings reset due to lower group profitability and negative free cash flow, our conviction in Alibaba remains intact. The company is ramping investment in AI infrastructure and has disclosed that its model-as-a-service run-rate revenue is expected to exceed RMB 30 billion by fiscal year end. This validates Alibaba's differentiated full-stack positioning across proprietary chips, cloud infrastructure, and leading models. We view Alibaba as one of the best-positioned proxies for China's AI supply chain and remain invested.

Alibaba was down 21.3%. Its results were all about AI, and how its investments are paying off, and management’s confidence to make further investments. The results were generally well received. Share price fluctuations are par for the course, especially for Alibaba. We are not fussed. As a consequence of the falling share price, its maintainable earnings yield (on our numbers) has increased to 7.7% and it is trading at a circa 30% discount to our valuation. The Fund’s current position is 2.6%.

Despite the recent challenges faced by Alibaba, including high levels of AI capex spending and increased competition in the Quick Services business, we continue to hold Alibaba as it transitions from a legacy e-commerce player into an AI infrastructure provider. The Cloud business has shown resilience, with margins expanding and revenues up 38% year-over-year. This strategic shift positions Alibaba well for future growth in the AI sector, which we believe will enhance its competitive moat.

Alibaba was down 21.3%. Its results were all about AI, and how its investments are paying off, and management’s confidence to make further investments. The results were generally well received. Share price fluctuations are par for the course, especially for Alibaba. We are not fussed. As a consequence of the falling share price, its maintainable earnings yield (on our numbers) has increased to 7.7% and it is trading at a circa 30% discount to our valuation.

Alibaba faced a challenging quarter with a significant decline of 24%. The company is experiencing soft domestic retail spending and muted consumer confidence, which are weighing heavily on its market performance. The broader context shows that many Chinese holdings, including Alibaba, struggled amidst these macroeconomic headwinds. The outlook remains uncertain as these factors could persist, leading to a cautious stance on the investment.