Managing $17 billion in assets fund is bullish on Alibaba Group Holding Limited Sponsored ADR (BABA.US): AI business is equivalent to a free call option, stock price only reflects e-commerce value.

The fund manager managing $17 billion in assets said that the current stock price of Alibaba Group Holding Limited Sponsored ADR (BABA.US) only reflects its e-commerce business value, and does not take into account the growth potential of its artificial intelligence (AI) business. In recent months, global concerns over the investment in AI by large cloud service providers, combined with ongoing price competition domestically, have put pressure on Chinese tech stocks. This has caused the significant previous rise in the stock price of Alibaba Group Holding Limited Sponsored ADR to be tempered, with its Hong Kong stock price falling 26% from its peak in October. Christian Heck, a portfolio manager at First Eagle Investments in New York, believes that this well-known Chinese online retail business provides a secure margin for the company. "If you do the math, you will find that Alibaba Group Holding Limited Sponsored ADR's AI business is currently completely included for free, akin to a free call option," Heck said in an interview on Tuesday. "I believe this is an attractive position." The First Eagle Overseas Fund he co-manages has returned 31% in the past year, outperforming 85% of its peers. Heck's analysis suggests that the attractiveness of Alibaba Group Holding Limited Sponsored ADR lies in its business portfolio covering the complete AI industry chain, ranging from infrastructure to proprietary and open-source models. This comprehensive layout sets it apart from tech companies such as OpenAI and Oracle Corporation (ORCL.US) that focus on a single area. "They have exceptional capabilities throughout the entire AI technology stack, which is extremely rare," Heck emphasized. "Alibaba Group Holding Limited Sponsored ADR's AI business is poised to become a profitable business segment." Adhering to the investment philosophy of finding undervalued quality companies, First Eagle made an initial investment in Alibaba Group Holding Limited Sponsored ADR three years ago. The stock currently has a price-to-earnings ratio of 16 times based on expected earnings for the next 12 months, a decrease from its recent peak of 22 times. The Chinese internet giant will announce its third-quarter results on Thursday. Earlier this month, Alibaba Group Holding Limited Sponsored ADR announced a strategic adjustment focusing on commercializing AI and raised the prices of its AI computing power and storage products by up to 34% on Wednesday.