Alibaba Group Holding Ltd

Software stocks are broadly hated, creating a contrarian buying opportunity analogous to Chinese equities two years ago when widespread fear preceded significant gains.

Lead Edge bought Alibaba when investor sentiment on China was deeply negative. The stock has doubled but still trades at just 15x earnings despite no growth, illustrating the power of contrarian buying.

With only 2% YoY revenue growth, net income down by two-thirds, and $50B+ in required CapEx over three years, Alibaba's near-term results will continue to suffer and things must go very well to achieve a decent ROI.

Alibaba owns data centers, makes chips, trains AI models, and serves 300M+ users through its Qwen app — making it 'almost like Amazon and Alphabet combined' in China, with cloud revenue growing 30% and trading at just 17x earnings.

Despite having rare end-to-end AI capabilities — data centers, chips, models, and 300M+ consumer app users — Alibaba's 2% revenue growth, two-thirds drop in net income, and $50B+ capex commitment suggest near-term pain, though the stock trades at just 17x earnings.