To The Moon

$Alibaba(BABA)$ $BABA-W(09988)$

After six straight sessions of relentless selling, Alibaba Group Holding Ltd. (NYSE: BABA) has once again found itself in the market’s crosshairs — this time, caught in the crossfire of renewed U.S.-China tensions. The stock plunged nearly 7% intraday, briefly touching the $160 level before paring some losses. What began as a fragile rebound in Chinese equities quickly reversed course as investors digested a new round of harsh trade rhetoric from former President Donald Trump, who pledged sweeping tariffs and tougher trade enforcement on China if re-elected.

This sudden resurgence of geopolitical risk has reignited old fears that Chinese tech giants, already battling regulatory overhangs at home and deglobalization pressures abroad, could once again face a winter of volatility. The question now facing investors is a familiar one: Is Alibaba a deep-value opportunity at $160 — or a falling knife that could slice deeper before the pain ends?

Market Turbulence Returns: A Familiar Storm for Chinese Equities

For Alibaba shareholders, the past week has been brutal. The stock has lost nearly 15% over six trading sessions, wiping out months of steady gains. The broader KraneShares CSI China Internet ETF (KWEB) tumbled alongside, underscoring that this was not an Alibaba-specific issue but a sector-wide correction.

The trigger? A combination of renewed trade tension, risk-off sentiment, and fears that Chinese ADRs could face fresh scrutiny from Washington. Trump’s statements — delivered with characteristic bluntness — suggested that if elected, his administration would consider a “comprehensive tariff plan” targeting Chinese imports, coupled with “supply chain repatriation incentives” for U.S. manufacturers. Markets quickly interpreted that as a direct threat to the fragile economic détente between the world’s two largest economies.

This is not the first time such rhetoric has sent shockwaves through Chinese equities. The “trade war” narrative, which dominated markets in 2018–2019, resulted in wild price swings for Alibaba, Tencent, and JD.com, and a sharp drop in investor confidence in China-linked assets. The latest comments from Trump have stirred memories of that volatile era — one that investors thought had largely been priced out.

A Fundamentally Solid Giant, But Sentiment Remains Fragile

Despite the external noise, Alibaba’s fundamentals remain intact. The company continues to generate robust free cash flow (over $20 billion annually) and holds more than $70 billion in cash and short-term investments. Core commerce, representing over two-thirds of total revenue, remains resilient, supported by recovering domestic consumption and cost discipline.

Recent earnings showed modest growth — revenue up 5% year-over-year and net income rising more than 15%, reflecting improved operational efficiency. The company’s cloud segment, once a drag, has regained momentum as China’s AI and enterprise digitization boom accelerates. Meanwhile, the international commerce division, anchored by Lazada and AliExpress, continues expanding its footprint across emerging markets.

Yet valuation tells a contrasting story. At around $160, Alibaba trades at roughly 9x forward earnings and less than 1.2x price-to-sales — levels that suggest deep value relative to its long-term potential. The stock’s intrinsic value, based on historical cash flow multiples, arguably sits closer to the $200–$220 range. But value alone isn’t enough to attract capital when political risk clouds the horizon.

Investors remain cautious, not because they doubt Alibaba’s profitability, but because they fear headline risk — the kind that can erase weeks of gains with a single speech.

Trump’s China Rhetoric: Economic Strategy or Political Theater?

Trump’s comments on China are not entirely unexpected — they fit into his long-standing “America First” economic platform, which prioritizes domestic manufacturing and reduced reliance on foreign supply chains. However, the timing and tone have amplified investor anxiety.

With the U.S. economy slowing, inflation lingering, and a contentious election year underway, China once again provides a convenient political target. Trump’s mention of “permanent tariffs” and a “hard reset” of trade relations may resonate with certain voter blocs, but markets see such statements as destabilizing.

From a macroeconomic perspective, higher tariffs could exacerbate global inflation and disrupt already strained supply chains. For multinational companies like Alibaba that depend on cross-border logistics, U.S.-China fragmentation could reduce market access, complicate partnerships, and stoke long-term valuation discounts.

Yet, many analysts argue that Trump’s rhetoric is more political signaling than actionable policy — at least for now. The actual implementation of a new tariff regime would face logistical, legal, and diplomatic hurdles. Still, even verbal threats can shift sentiment sharply, as we’ve seen this week.

The Knife’s Edge: Would You Buy Alibaba at $160?

For long-term investors, Alibaba at $160 presents both opportunity and danger. The company’s fundamentals and balance sheet strength argue in favor of accumulation, but geopolitical volatility and macro uncertainty make timing critical.

At this level, the market is pricing in substantial political and regulatory risk — effectively assigning a permanent discount to Chinese tech exposure. Yet if tensions ease or the upcoming U.S. election shifts policy tone, a re-rating could happen swiftly. Historically, such moments of fear have produced strong long-term returns for those willing to stomach near-term pain.

Technical indicators show that $160–$165 could serve as a psychological support zone. However, if global risk aversion deepens, the next floor may not appear until around $145 — a level last seen during the 2022 selloff. Investors looking to “catch the knife” should therefore do so cautiously, possibly through staggered entries or dollar-cost averaging rather than a full allocation.

For those with a multi-year horizon, Alibaba’s long-term thesis — a dominant platform in the world’s second-largest economy, with a growing international presence and robust profitability — remains intact. But near-term volatility, driven by political noise, could persist well into the 2025 election cycle.

Verdict: Cautious Accumulation, Not Blind Faith

At $160, Alibaba is undeniably cheap by traditional valuation metrics, but cheap does not always mean safe. The stock’s trajectory will depend not only on earnings and execution but on geopolitics — an unpredictable variable beyond management’s control.

Verdict: Cautious Accumulation. For investors willing to endure volatility, initiating or adding small positions near $160–$165 could yield strong long-term returns, provided one accepts that short-term pain may continue. Traders, however, may prefer to wait for confirmation of support before re-entering.

Key Takeaways

1. Political Noise Dominates: Trump’s renewed tariff threats have reignited fears of another U.S.-China trade war, pressuring all major Chinese ADRs.

2. Alibaba’s Fundamentals Remain Strong: Despite sentiment swings, the company continues to deliver solid cash flow and operational growth.

3. Valuation Is Deeply Discounted: Trading at single-digit earnings multiples, Alibaba is one of the cheapest large-cap tech stocks globally.

4. Near-Term Volatility Likely: Until clarity on U.S.-China relations emerges, investors should brace for sharp price movements.

5. Strategic Accumulation Zone: The $160 level offers an attractive entry for long-term holders but requires patience and risk tolerance.

Conclusion: Alibaba’s six days of pain may be less about fundamentals and more about fear — the fear that trade tensions, once again, could derail global growth and investor confidence in China. But history shows that market overreactions often create opportunities. For disciplined investors, $160 may represent not a falling knife, but the handle of one — provided they know how to hold it.