We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
BABA vs. META: Which AI Data Center Giant Is the Better Bet?
Read MoreHide Full Article
Key Takeaways
Meta Platforms boosts capex to $125-$145B to expand AI data center capacity globally.
META's ad business funds growth, with operating income expected to exceed 2025 levels.
Alibaba faces margin pressure, cash outflows and reliance on domestic chips for AI buildout.
Alibaba (BABA - Free Report) and Meta Platforms (META - Free Report) sit on opposite sides of the globe, yet both have repositioned around one ambition: building the AI data center capacity to power the next era of artificial intelligence (AI). Alibaba is expanding its Cloud Intelligence backbone at home and abroad, while Meta Platforms pours record sums into AI-optimized U.S. campuses.
The timing makes them worth comparing. Both reported within weeks of each other and paired those updates with a wave of April and May 2026 data center announcements and aggressive forward-looking roadmaps. 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 frames itself as China's leading AI and cloud champion, and its ambitions are undeniably large. On its fourth-quarter fiscal 2026 call, CEO Eddie Wu reaffirmed a five-year, $100 billion external cloud and AI revenue target first set a quarter earlier, backed by the RMB380 billion (about $53 billion) it pledged in early 2025 for AI and cloud infrastructure over three years.
The company reported that AI-related product revenues have grown at triple-digit rates for 11 consecutive quarters and now represents 30% of cloud revenues, a share it expects to exceed 50% within a year.
In April 2026, Alibaba and China Telecom launched a Shaoguan data center running 10,000 of Alibaba's self-developed Zhenwu chips, with plans to scale toward 100,000. Yet the strategy carries visible strain. The Zhenwu buildout is partly a workaround for restricted access to advanced foreign chips, leaving Alibaba reliant on domestically produced silicon whose competitiveness remains unproven at true frontier scale.
More troubling, the spending is overwhelming profitability: adjusted EBITA fell sharply, and free cash flow swung to a full-year outflow, driven by heavy investment in quick commerce and rising cloud infrastructure spending. The forward guidance leans heavily on accelerating cloud growth, translating into returns that have not yet materialized. With aggressive capital commitments, thinning margins and a domestic-chip dependency exposed to policy risk, Alibaba's AI data center thesis remains a promise that investors must take largely on faith.
The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $7.43 per share, down 4.6% over the past 30 days, indicating a 91% year-over-year increase.
Meta's case rests on a strong core business that is funding an unusually aggressive infrastructure push. On its first-quarter 2026 earnings call, the company raised full-year capital expenditure guidance to a range of $125-$145 billion, up from $115-$135 billion, attributing the increase to higher component and memory costs and additional data center capacity for future years.
CFO Susan Li noted that multi-year cloud and infrastructure commitments jumped by roughly $107 billion in the quarter, locking in compute capacity well into the future. Crucially, Meta still guided second-quarter 2026 revenues to $58-$61 billion and reiterated that full-year operating income would exceed 2025's level, evidence that the advertising engine can fund the buildout.
Meanwhile, the data center momentum is equally tangible. In April 2026, Meta broke ground on its Tulsa, OK, facility, its 32nd globally, and extended a partnership with Broadcom to deploy its custom MTIA accelerators across multi-gigawatt clusters through 2029. Larger campuses such as Hyperion and Prometheus anchor a roadmap that management describes through its Meta Compute initiative, which Zuckerberg frames as a durable, long-term efficiency advantage.
The headwinds, however, are real. The capex surge is pressuring free cash flow, and Li cautioned that Meta could keep underestimating its compute needs. The central uncertainty is return timing: management tracks model quality and product scale rather than near-term monetization, leaving investors to weigh when the spending converts to profit. Still, unlike a pure infrastructure bet, Meta's outlays are underwritten by an already-profitable, growing core that generates the cash to sustain them.
The Zacks Consensus Estimate for 2026 earnings is pegged at $33 per share, which has increased 10.88% over the past 30 days. This suggests 40.49% year-over-year growth.
On valuation, both names clearly trade at a premium, but the comparison is telling. BABA stock currently trades at a trailing 12-month price-to-earnings ratio of 40.43X, nearly double Meta's 20.77X. That gap is hard to justify given Alibaba's collapsing profitability and cash outflows, whereas Meta's lower multiple is supported by a profitable, growing core that funds its AI investment internally.
BABA vs. META: P/E TTM Ratio
Image Source: Zacks Investment Research
Price action reinforces the divergence: shares of Alibaba have lost 12.9% in the year-to-date period, underperforming Meta's more modest 3.8% decline over the same time frame. On fundamentals, Meta's premium valuation ultimately looks far more justified of the two.
BABA Underperforms META Year-to-date
Image Source: Zacks Investment Research
Conclusion
Weighing both, Meta holds the clearer edge. Its record AI data center spending, spanning Tulsa, Hyperion, the Broadcom MTIA partnership and Meta Compute, is underwritten by a profitable, growing core, with guidance pointing to higher full-year operating income. Alibaba's ambitious $100 billion cloud target and Zhenwu buildout, by contrast, come alongside collapsing margins, negative free cash flow and dependence on unproven domestic chips. With a more justified valuation and a steadier outlook, Meta offers better upside potential. Investors should hold Meta or await a better entry point on any pullback, while selling or staying away from Alibaba stock right now. META carries a Zacks Rank #3 (Hold), while BABA has a Zacks Rank #4 (Sell).
View the Zacks #1 Rank List
Image: Bigstock
BABA vs. META: Which AI Data Center Giant Is the Better Bet?
Key Takeaways
Alibaba (BABA - Free Report) and Meta Platforms (META - Free Report) sit on opposite sides of the globe, yet both have repositioned around one ambition: building the AI data center capacity to power the next era of artificial intelligence (AI). Alibaba is expanding its Cloud Intelligence backbone at home and abroad, while Meta Platforms pours record sums into AI-optimized U.S. campuses.
The timing makes them worth comparing. Both reported within weeks of each other and paired those updates with a wave of April and May 2026 data center announcements and aggressive forward-looking roadmaps. 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 frames itself as China's leading AI and cloud champion, and its ambitions are undeniably large. On its fourth-quarter fiscal 2026 call, CEO Eddie Wu reaffirmed a five-year, $100 billion external cloud and AI revenue target first set a quarter earlier, backed by the RMB380 billion (about $53 billion) it pledged in early 2025 for AI and cloud infrastructure over three years.
The company reported that AI-related product revenues have grown at triple-digit rates for 11 consecutive quarters and now represents 30% of cloud revenues, a share it expects to exceed 50% within a year.
In April 2026, Alibaba and China Telecom launched a Shaoguan data center running 10,000 of Alibaba's self-developed Zhenwu chips, with plans to scale toward 100,000. Yet the strategy carries visible strain. The Zhenwu buildout is partly a workaround for restricted access to advanced foreign chips, leaving Alibaba reliant on domestically produced silicon whose competitiveness remains unproven at true frontier scale.
More troubling, the spending is overwhelming profitability: adjusted EBITA fell sharply, and free cash flow swung to a full-year outflow, driven by heavy investment in quick commerce and rising cloud infrastructure spending. The forward guidance leans heavily on accelerating cloud growth, translating into returns that have not yet materialized. With aggressive capital commitments, thinning margins and a domestic-chip dependency exposed to policy risk, Alibaba's AI data center thesis remains a promise that investors must take largely on faith.
The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $7.43 per share, down 4.6% over the past 30 days, indicating a 91% year-over-year increase.
Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote
The Case for META Stock
Meta's case rests on a strong core business that is funding an unusually aggressive infrastructure push. On its first-quarter 2026 earnings call, the company raised full-year capital expenditure guidance to a range of $125-$145 billion, up from $115-$135 billion, attributing the increase to higher component and memory costs and additional data center capacity for future years.
CFO Susan Li noted that multi-year cloud and infrastructure commitments jumped by roughly $107 billion in the quarter, locking in compute capacity well into the future. Crucially, Meta still guided second-quarter 2026 revenues to $58-$61 billion and reiterated that full-year operating income would exceed 2025's level, evidence that the advertising engine can fund the buildout.
Meanwhile, the data center momentum is equally tangible. In April 2026, Meta broke ground on its Tulsa, OK, facility, its 32nd globally, and extended a partnership with Broadcom to deploy its custom MTIA accelerators across multi-gigawatt clusters through 2029. Larger campuses such as Hyperion and Prometheus anchor a roadmap that management describes through its Meta Compute initiative, which Zuckerberg frames as a durable, long-term efficiency advantage.
The headwinds, however, are real. The capex surge is pressuring free cash flow, and Li cautioned that Meta could keep underestimating its compute needs. The central uncertainty is return timing: management tracks model quality and product scale rather than near-term monetization, leaving investors to weigh when the spending converts to profit. Still, unlike a pure infrastructure bet, Meta's outlays are underwritten by an already-profitable, growing core that generates the cash to sustain them.
The Zacks Consensus Estimate for 2026 earnings is pegged at $33 per share, which has increased 10.88% over the past 30 days. This suggests 40.49% year-over-year growth.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Valuation and Price Performance Comparison
On valuation, both names clearly trade at a premium, but the comparison is telling. BABA stock currently trades at a trailing 12-month price-to-earnings ratio of 40.43X, nearly double Meta's 20.77X. That gap is hard to justify given Alibaba's collapsing profitability and cash outflows, whereas Meta's lower multiple is supported by a profitable, growing core that funds its AI investment internally.
BABA vs. META: P/E TTM Ratio
Image Source: Zacks Investment Research
Price action reinforces the divergence: shares of Alibaba have lost 12.9% in the year-to-date period, underperforming Meta's more modest 3.8% decline over the same time frame. On fundamentals, Meta's premium valuation ultimately looks far more justified of the two.
BABA Underperforms META Year-to-date
Image Source: Zacks Investment Research
Conclusion
Weighing both, Meta holds the clearer edge. Its record AI data center spending, spanning Tulsa, Hyperion, the Broadcom MTIA partnership and Meta Compute, is underwritten by a profitable, growing core, with guidance pointing to higher full-year operating income. Alibaba's ambitious $100 billion cloud target and Zhenwu buildout, by contrast, come alongside collapsing margins, negative free cash flow and dependence on unproven domestic chips. With a more justified valuation and a steadier outlook, Meta offers better upside potential. Investors should hold Meta or await a better entry point on any pullback, while selling or staying away from Alibaba stock right now. META carries a Zacks Rank #3 (Hold), while BABA has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.