China's dominant e-commerce and cloud computing platform at a deep discount — Tepper's contrarian bet on Alibaba's recovery as China stimulus and regulatory easing unlock trapped value
David Tepper
Appaloosa Management
Est. ~9.8% of total portfolio
“David Tepper: 'I love buying things that people hate. When everyone is selling China, that's when I want to buy. The worst of the regulatory crackdown is behind us.'”
The Business
- Alibaba Group operates China's largest e-commerce platforms (Taobao, Tmall), Alibaba Cloud (#1 in China), Cainiao logistics, and international commerce (AliExpress, Lazada, Trendyol)
- TTM revenue of CNY 1.01T (~$140B) with CNY 125B (~$17B) net income, demonstrating strong profitability despite challenges
- The company announced a corporate restructuring in 2023, splitting into six business groups with potential for independent listings
- Alibaba is investing aggressively in AI through Alibaba Cloud and Tongyi Qianwen (its large language model)
Why They Own It
“David Tepper: 'I love buying things that people hate. When everyone is selling China, that's when I want to buy. The worst of the regulatory crackdown is behind us.'”
- Alibaba is China's dominant e-commerce platform (Taobao, Tmall) with ~50% market share — the Amazon of China at a fraction of the valuation
- Cloud Intelligence Group (Alibaba Cloud) is China's #1 cloud platform, benefiting from AI adoption and enterprise digitization
- At ~$131/ADR and 10x earnings, Alibaba trades at a massive discount to Western tech peers despite strong profitability
- Tepper's distressed investing expertise: buying deeply out-of-favor assets when pessimism peaks and regulatory pressure eases
- China government stimulus and regulatory easing signal a shift from crackdown to support for private technology companies
What the investor sees
Alibaba trades at approximately $131/ADR with a market cap of roughly $300B — approximately 10x earnings and well below its 2020 peak of $300+/ADR. Tepper's thesis is that the China discount is overdone: the regulatory crackdown has eased, the government is providing fiscal stimulus, and Alibaba's core business remains dominant. If Alibaba re-rates to even 15x earnings (still a discount to Western peers), the stock would be worth $200+.
Financial Snapshot
CNY 1.01T (~$140B)
revenue ttm
CNY 125B (~$17B)
net income ttm
~$300B
market cap
$52.32/ADR
eps
22%
operating margin
CNY 129B (~$18B)
free cash flow ttm
12%
profit margin
~$131/ADR
stock price
The Moat
- E-commerce dominance — Taobao and Tmall together hold ~50% of China's e-commerce market, the world's largest
- Cloud leadership — Alibaba Cloud is China's #1 cloud platform with 30%+ market share, serving government and enterprise customers
- Ecosystem network effects — merchants, consumers, logistics, and payments create a self-reinforcing ecosystem
- Cainiao logistics — proprietary logistics network providing delivery infrastructure across China
- Data and AI — decades of transaction data and AI investment create superior recommendation and advertising capabilities
What Could Go Wrong
China regulatory risk — the Chinese government has demonstrated willingness to impose massive fines and restrictions on tech platforms
VIE structure — ADRs represent interests in a variable interest entity, not direct ownership of the Chinese operating companies
Geopolitical tensions — US-China relations could result in ADR delisting or trade restrictions
Competition from PDD (Pinduoduo/Temu), JD.com, and Douyin (TikTok) in e-commerce
Macro weakness — China's economic slowdown, property crisis, and weak consumer confidence impact e-commerce spending
Jack Ma's reduced role — the founder's marginalization creates uncertainty about long-term strategic direction
Catalysts
- China fiscal stimulus — government spending and monetary easing boosting consumer confidence and spending
- Regulatory easing — government signaling support for private technology companies after years of crackdowns
- AI investment — Alibaba Cloud's AI services and Tongyi Qianwen LLM creating new revenue opportunities
- Corporate restructuring — potential IPOs of individual business units unlocking trapped value
- Share buybacks — Alibaba has been aggressively repurchasing shares at discounted valuations
- International expansion — AliExpress, Lazada, and Trendyol growing in international markets
In Their Own Words
“David Tepper: 'You can own the Chinese Amazon at 10x earnings. In the US, Amazon trades at 27x. Even if the discount never fully closes, there's enormous upside.'”
“David Tepper: 'I'm not a China bull or a China bear. I'm a cheap-stock bull. Alibaba at $130 is cheap. The business generates $17 billion in net income.'”