Alibaba
Thesis
- The verdict: Tencent and Amazon are better investments.
- The business: a Chinese commerce marketplace that rents attention and transaction infrastructure to third-party merchants, and a cloud and AI compute business.
- Moat:
- Merchant demand aggregation and the advertising auction that prices it. Scale advantage in size, not unit economics.
- The largest Chinese cloud installed base, with first-party demand and a model franchise as a demand funnel.
- Earnings drivers:
- The take rate on core transactions (prepaid advertising bid + commission + software service fee + logistics fee).
- Cloud revenue growth against a fixed cost fleet.
- Quick-commerce and consumer-AI subsidies.
- Economics:
- Merchants prepaying for advertising contributes to deferred revenue and negative working capital.
- Risks:
- Commoditized token pricing outside the frontier.
- State-driven capacity expansion.
- What to watch:
- Sales and marketing as a share of revenue.
- Cloud segment margin and growth.
- Compute constraint / secured wave allocation?
- Free cash flow against CapEx.
