AI Division Valued as a 'Free Call Option' by First Eagle
Christian Heck, a portfolio manager at First Eagle Investments Management, asserts that Alibaba's current stock price only accounts for its legacy e-commerce business. He argues that the market is assigning zero value to its extensive artificial intelligence operations, effectively giving investors a "completely free" call option on a business poised for significant growth and profitability. This perspective is supported by valuation metrics, with the stock trading at an attractive 21 times forward earnings. Multiple analyses concur, with one indicating shares trade 48.5% below an estimated fair value, while another suggests a risk-adjusted intrinsic value of $254 per share, far above its recent price of around $136.
Alibaba Sharpens AI Monetization with 34% Price Hikes
Underpinning the growth thesis, Alibaba is taking concrete steps to convert its AI capabilities into revenue. The company announced it is increasing prices on certain AI computing chips and cloud storage products by as much as 34% in response to strong demand. This commercial push is further solidified by the launch of Wukong, a new enterprise AI platform for automating business workflows, and the formation of the Token Hub business group to spearhead AI monetization. These actions follow a period where Alibaba's AI services revenue experienced triple-digit growth, demonstrating a clear path from investment to financial return.
Strategic Investments Reinforce AI Ecosystem
Alibaba's AI strategy extends beyond its internal operations, solidifying its position across the entire technology stack. The company is a key backer of Chinese AI startup Moonshot AI, which has seen its valuation quadruple to approximately $18 billion in just three months. This investment approach complements its self-developed models and infrastructure, distinguishing Alibaba from more narrowly focused technology firms. According to First Eagle, this comprehensive capability across the AI ecosystem is rare and positions the company to build a large-scale, highly profitable business.
Edgen Stock·Mar 19 2026, 03:24
