Chase the Surge in Alibaba or Baidu Stock?

Along with U.S. equities, favorable market sentiment has led to a resurgence in Chinese tech stocks with Alibaba BABA and Baidu BIDU leading the way.Reigniting the buzz, the U.S. and China reached an ongoing framework trade agreement back in May, offsetting previous tariff concerns that had compressed Chinese equities.Fast forward four months, and AI-driven optimism has kept propelling Alibaba and Baidu stock, which have both soared over +30% since the trade deal was announced between the world’s two largest economies on May 12.With BABA and BIDU printing fresh 52-week highs of well over $100 a share, it’s certainly a worthy topic of whether investors should chase the surge in Alibaba or Baidu stock.Image Source: Zacks Investment Research  Alibaba & Baidu’s AI ExpansionDriving bullish sentiment and setting Alibaba and Baidu’s AI endeavors apart is that they have produced multimodal AI models, like many of their big tech counterparts in the U.S. These AI systems can understand and generate multiple types of data (modalities) for text, vision, audio, video, and sensor components. As beneficiaries of China’s broader push into AI, the country's restrictions on Nvidia’s NVDA AI chips have opened the door for Alibaba and Baidu to shine.Alibaba most recently unveiled its powerful new AI model, “Qwen3-Max”, which has over a trillion parameters. Setting its sights on global data center expansion and striking a strategic partnership with one of the largest telecom companies in China (China Unicom), Alibaba has pledged to spend more than $50 billion on AI in the next three years.Similarly, Baidu has produced several advanced AI systems stemming from its multimodal large language model (LLM) ERNIE. Furthermore, like Alibaba, Baidu deploys its own internally designed AI chips, with the company securing a strategic deal with China Merchants Group (CMG) to deploy AI agents and digital employees across key industrial sectors. Tracking Alibaba & Baidu’s OutlookBased on Zacks' estimates, Alibaba’s total sales are expected to increase 4% in its current fiscal 2026 and are projected to rise another 11% in FY27 to $160.04 billion.Reflective of higher operating costs, Alibaba’s annual earnings are expected to decrease 14% in FY26 to $7.72 per share compared to EPS of $9.01 in its FY25. However, the e-commerce leader's FY27 EPS is projected to rebound and climb 39% to $10.73.Image Source: Zacks Investment ResearchPivoting to Baidu, its top line is expected to contract 1% in its current FY25, but is projected to rebound and expand 4% in FY26 to $19.14 billion.Following a record year for earnings, Baidu’s EPS is currently slated to drop 28% to $7.51 from an all-time peak of $10.53 in FY24. Optimistically, the internet search giant's FY26 EPS is projected to stabilize and rebound 9% to $8.19.   Image Source: Zacks Investment Research Monitoring Alibaba & Baidu’s ValuationLeading to the exhilarating surge in Alibaba and Baidu stock had been their deflated valuations, with BABA and BIDU still trading at reasonable forward P/E multiples of 21.8X and 15.9X, respectively. That said, the extended rally has moved them swiftly off their recent lows of under 12X forward earnings, which may have been enticing value investors.Image Source: Zacks Investment ResearchIn contrast to many of the growth-oriented big tech stocks in the U.S., Alibaba and Baidu trade at very respectable price to forward sales multiples, and are still at the low end of a decade-long scope in this regard, with P/S ratios under 3X.Image Source: Zacks Investment Research Bottom Line & ETFs to WatchWith Alibaba and Baidu stock trading well over $100 a share, it may be less tempting to buy, although both land a Zacks Rank #3 (Hold) at the moment. AI expansion should keep BABA and BIDU in the conversation of suitable long-term investments, but better buying opportunities could be ahead after such a rapid surge over the last few months.For investors or traders who may be looking for indirect ways to get exposure to the broader rally in Chinese stocks, the Invesco China Technology CQQQ ETF and the iShares China Large-Cap FXI ETF are ways to do so.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Baidu, Inc. (BIDU): Free Stock Analysis Report Alibaba Group Holding Limited (BABA): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report iShares China Large-Cap ETF (FXI): ETF Research Reports Invesco China Technology ETF (CQQQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks