China's e-commerce titans Alibaba (BABA Quick QuoteBABA - Free Report) and JD.com (JD Quick QuoteJD - Free Report) represent two distinct approaches to capturing the world's largest digital commerce market. Both companies have evolved beyond traditional retail platforms, expanding into cloud computing, logistics, artificial intelligence, and global markets. Their recent strategic moves and financial performance paint contrasting pictures of adaptation and growth potential in an increasingly competitive landscape.

While both stocks have faced headwinds from regulatory concerns and market volatility, their divergent paths in AI development, international expansion, and operational efficiency present compelling investment considerations.

Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for BABA Stock

Alibaba's strategic transformation into an AI-powered technology platform represents a paradigm shift that fundamentally repositions the company for sustained growth. The groundbreaking partnership with HONOR smartphone manufacturer exemplifies this evolution, marking the first successful integration of Alibaba's proprietary AI agents directly into consumer hardware. This breakthrough creates entirely new monetization pathways while expanding Alibaba's technological influence beyond traditional cloud infrastructure into the massive mobile device ecosystem.

Management's commitment to invest RMB 380 billion over three years in AI infrastructure demonstrates exceptional confidence in this strategic direction. The widespread adoption of Alibaba's Qwen3 language model across diverse platforms, including Xiaomi's AI assistant and multiple smartphone manufacturers, validates the commercial viability of this approach. This multi-platform integration strategy systematically reduces revenue concentration risks from core e-commerce operations while establishing Alibaba as an indispensable AI infrastructure provider.

The company's cloud division exhibits accelerating revenue growth driven by surging AI demand, reinforcing the strategic value of this transformation. Alibaba's open-source methodology has generated remarkable results, with more than 300 million global downloads and 100,000 derivative models establishing Qwen as the world's largest open-source AI family. This ecosystem strategy creates powerful network effects that continuously strengthen competitive advantages.

Despite food delivery market pressures, Alibaba's core e-commerce platforms demonstrate resilient user engagement and improving monetization efficiency through AI-enhanced recommendations and operational optimization. Strategic international partnerships and targeted logistics investments provide supplementary growth channels that complement the primary AI-driven transformation, creating a diversified portfolio of value drivers positioned for long-term expansion.

The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $10.14 per share, indicating a 12.54% year-over-year increase.

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The Case for JD Stock

JD.com's operational trajectory reveals troubling strategic misalignment that undermines long-term value creation prospects. The aggressive food delivery expansion exemplifies this concerning pattern, generating massive cash outflows while failing to establish sustainable profitability pathways. Despite achieving 20 million daily orders, this rapid scaling systematically erodes margins across all business segments, creating unsustainable unit economics that question management's capital allocation discipline.

International logistics investments through JD Property, including expensive facilities in Abu Dhabi and the United Kingdom, represent poorly timed capital deployment during heightened market uncertainty. These infrastructure-heavy expansions demand substantial resources while domestic competition intensifies, forcing the company to fight battles on multiple fronts simultaneously. The strategic logic appears fundamentally flawed given current operational pressures.

JD's historical competitive advantage in logistics and fulfillment has become increasingly commoditized as rivals develop comparable capabilities. Partnerships with suppliers like Camposol demonstrate operational competence but lack transformative impact, representing incremental improvements rather than breakthrough innovations. These tactical initiatives fail to create meaningful differentiation in today's technology-driven marketplace.

The JoyExpress launch in Saudi Arabia exemplifies JD's capital-intensive expansion philosophy, requiring significant upfront investments without guaranteed returns. This self-operated model, while maintaining service quality, creates operational complexity that strains resources and limits scalability compared to asset-light technology platforms.

The consensus mark for 2025 earnings is pegged at $3.6 per share, indicating a 15.49% year-over-year decline.

Valuation and Price Performance

Both Alibaba and JD.com currently trade at discounted valuations, presenting attractive entry opportunities for value-conscious investors. Alibaba's P/E ratio of 10.02x appears more compelling despite being higher than JD's 7.66x, given Alibaba's superior financial metrics, diversified revenue streams, and stronger growth prospects in artificial intelligence and cloud computing. The valuation premium reflects market recognition of Alibaba's transformation into a technology-driven platform with multiple value drivers.

BABA vs. BIDU: P/E F12M Ratio

Image Source: Zacks Investment Research

Recent price performance further validates this assessment, with Alibaba shares climbing 25.8% year to date, significantly outperforming JD.com's 10% decline. This divergence demonstrates investor confidence in Alibaba's strategic direction while highlighting concerns about JD's competitive positioning and margin pressures from food delivery investments.

BABA Outperforms BIDU Year to Date

Image Source: Zacks Investment Research

Conclusion

Alibaba emerges as the superior investment choice based on its transformative AI capabilities, diversified revenue streams, and strategic positioning for future growth. The company's substantial AI investments, successful partnerships with device manufacturers, and leadership in cloud services create multiple value drivers beyond traditional e-commerce. While JD's operational excellence remains noteworthy, its heavy capital requirements for international expansion and aggressive food delivery competition present significant headwinds. Alibaba's technology-driven approach offers better scalability and margin potential, superior market positioning, and a clearer path to sustainable competitive advantages. The company's AI ecosystem development and cloud infrastructure investments position it advantageously for long-term value creation in China's evolving digital economy. Investors should hold existing Alibaba positions or wait for better entry points, while considering reducing JD exposure given its challenging competitive dynamics and capital-intensive growth strategy. BABA currently carries a Zacks Rank #3 (Hold), whereas JD has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.