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DeepSeek Illustrates the Significance of the AI Race
Founded by a quant fund manager, DeepSeek is a Chinese AI startup that seemingly came out of nowhere to wreak havoc on Wall Street on Monday. Allegedly, Deepseek has discovered the "holy grail" of AI and created a ChatGPT-like large language model (LLM) on a shoestring budget of just ~$6 million. If true (and there are doubts), DeepSeek's success (shot to number one on the Appleapp store) is unprecedented. Mega-cap tech stocks like Microsoft, Meta Platforms, and Alphabet have spent literally billions of dollars to build expensive data centers to power AI filled with expensive Nvidia GPUs.
Regardless of whether or not DeepSeek's claims are valid, Wall Street investors pulled the trigger on selling AI-related stocks first and asked questions later. For instance, Nvidia's $560 billion swoon Monday marked the single largest daily market cap loss for a stock in history.
Whether you believe that what DeepSeek accomplished was on a low-budget or not, the model unveiled was impressive, regardless of the cost.
"Deepseek's r1 is an impressive model, particularly around what they're able to deliver for the price." ~ Sam Altman, CEO of ChatGPT parent OpenAI
"DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling." ~ Nvidia Spokesperson
BABA Unveils Qwen2.5-Max
The whirlwind week is an example of how fast the pace of advancement is in AI and AI models. Yesterday, Alibaba unveiled a new large language model that claims to beat DeepSeek, ChatGPT, and Meta's Lama. According to BABA, it outperformed the global leaders in almost every metric.
Below, I will explain three reasons investors should buy the stock (even when you don't account for BABA's new AI model):
1. BABA's Historically Low Valuation
BABA's current valuation is the cheapest it has ever been. In addition, BABA's valuation is inexpensive compared to that of its American counterparts. For instance, Amazon has a P/E ~50x while BABA's is just 12.94x.
2. BABA's Enjoys Easy Earnings Comps
Wall Street is a game of expectations, and BABA's expectations remain low. Earnings down trended from 2021 to 2023. In 2024, BABA's earnings rebounded, and by 2026, they are set to explode. A rebounding Chinese economy, new AI innovations, and fiscal stimulus should lead to a stronger Chinese stock market. Furthermore, BABA is no longer reliant only on the Chinese consumer – the company is pushing to expand into global markets such as Spain and South East Asia.
3. BABA Breaks Out
BABA shares are curling up the right-hand side of a massive base structure. Tuesday, as news of Qwen broke, volume turnover swelled, signaling heavy demand for shares.
Bottom Line
If "Qwen's" results hold up, Alibaba can cement itself as a premier AI juggernaut. Regardless, BABA is historically cheap, faces easy comps, and enjoys a bullish technical pattern.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Microsoft, Meta Platforms, Alphabet, Nvidia and Alibaba
For Immediate Release
Chicago, IL – January 30, 2025– Today, Zacks Investment Ideas feature highlights Microsoft (MSFT - Free Report) , Meta Platforms (META - Free Report) , Alphabet (GOOGL - Free Report) , Nvidia (NVDA - Free Report) and Alibaba (BABA - Free Report) .
BABA Releases AI Model: Should You Buy the Stock?
DeepSeek Illustrates the Significance of the AI Race
Founded by a quant fund manager, DeepSeek is a Chinese AI startup that seemingly came out of nowhere to wreak havoc on Wall Street on Monday. Allegedly, Deepseek has discovered the "holy grail" of AI and created a ChatGPT-like large language model (LLM) on a shoestring budget of just ~$6 million. If true (and there are doubts), DeepSeek's success (shot to number one on the Appleapp store) is unprecedented. Mega-cap tech stocks like Microsoft, Meta Platforms, and Alphabet have spent literally billions of dollars to build expensive data centers to power AI filled with expensive Nvidia GPUs.
Regardless of whether or not DeepSeek's claims are valid, Wall Street investors pulled the trigger on selling AI-related stocks first and asked questions later. For instance, Nvidia's $560 billion swoon Monday marked the single largest daily market cap loss for a stock in history.
Whether you believe that what DeepSeek accomplished was on a low-budget or not, the model unveiled was impressive, regardless of the cost.
"Deepseek's r1 is an impressive model, particularly around what they're able to deliver for the price." ~ Sam Altman, CEO of ChatGPT parent OpenAI
"DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling." ~ Nvidia Spokesperson
BABA Unveils Qwen2.5-Max
The whirlwind week is an example of how fast the pace of advancement is in AI and AI models. Yesterday, Alibaba unveiled a new large language model that claims to beat DeepSeek, ChatGPT, and Meta's Lama. According to BABA, it outperformed the global leaders in almost every metric.
Below, I will explain three reasons investors should buy the stock (even when you don't account for BABA's new AI model):
1. BABA's Historically Low Valuation
BABA's current valuation is the cheapest it has ever been. In addition, BABA's valuation is inexpensive compared to that of its American counterparts. For instance, Amazon has a P/E ~50x while BABA's is just 12.94x.
2. BABA's Enjoys Easy Earnings Comps
Wall Street is a game of expectations, and BABA's expectations remain low. Earnings down trended from 2021 to 2023. In 2024, BABA's earnings rebounded, and by 2026, they are set to explode. A rebounding Chinese economy, new AI innovations, and fiscal stimulus should lead to a stronger Chinese stock market. Furthermore, BABA is no longer reliant only on the Chinese consumer – the company is pushing to expand into global markets such as Spain and South East Asia.
3. BABA Breaks Out
BABA shares are curling up the right-hand side of a massive base structure. Tuesday, as news of Qwen broke, volume turnover swelled, signaling heavy demand for shares.
Bottom Line
If "Qwen's" results hold up, Alibaba can cement itself as a premier AI juggernaut. Regardless, BABA is historically cheap, faces easy comps, and enjoys a bullish technical pattern.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks Investment Research
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.