Best Stock to Buy Right Now: Alibaba vs. Amazon
Key Points
Alibaba and Amazon share striking similarities in their business models and ambitious AI aspirations.
Alibaba's AI sales have experienced seven consecutive quarters of triple-digit year-over-year growth.
Amazon is infusing AI into over 1,000 apps across the company.
Tech titans Alibaba (NYSE: BABA) and Amazon (NASDAQ: AMZN) share several similarities. For instance, both expanded beyond their e-commerce roots to become giants in the cloud computing space. Alibaba is the world's fourth largest cloud provider by market share, while Amazon is the global leader.
Now, the pair are moving into the artificial intelligence (AI) arena. Both leveraged their cloud infrastructures to develop sophisticated AI capabilities that they sell to other businesses.
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Alibaba and Amazon stand to see share price appreciation, thanks to the growth of the AI industry. But is one a better investment for the long haul? Here's a look at both companies to arrive at an answer.
Image source: Getty Images.
Digging into Alibaba
Alibaba stock has done well in 2025, rising 25% through July 7. Part of its share price boost comes from its success in the AI space.
In February, the company closed a deal with Apple to provide AI to iPhones sold in China. These kinds of wins propelled Alibaba's AI revenue to triple-digit year-over-year growth for seven straight quarters through its fiscal fourth quarter, which ended March 31.
As a result, the company's cloud computing division hit sales of $16.3 billion in its 2025 fiscal year. This represented an 11% year-over-year increase.
The division's growth contributed to Alibaba wrapping up fiscal 2025 with $137.3 billion in total revenue, a 6% jump up from the previous year. CEO Eddie Wu stated: "Looking ahead, we will remain focused on our core businesses and continue to drive AI + Cloud as a new engine for our long-term growth."
To that end, Alibaba's fiscal 2025 free cash flow (FCF) was down 53% year over year to $10.2 billion as the company invested heavily in infrastructure improvements to power its artificial intelligence systems.
A look at Amazon
Amazon shares haven't seen the surge Alibaba enjoyed in 2025. Amazon's stock is up just 2% this year through July 7, weighed down in part by President Donald Trump's tariff policies, which cast a cloud of uncertainty over the effect on consumer spending.
However, Wall Street may be underestimating Amazon's long-term potential. Its first-quarter sales rose 9% year over year to $155.7 billion. The company expects ongoing revenue growth despite the macroeconomic environment, with second-quarter sales projected to hit at least $159 billion, a 7% increase over 2024.
Like Alibaba, Amazon views investing in AI as a business imperative. "That's why there are more than 1,000 GenAI applications being built across Amazon," stated CEO Andy Jassy.
Among the areas receiving this AI infusion is Zoox, Amazon's latest business venture. Zoox is a driverless ride-hailing fleet controlled by AI, which is set to roll out this year.
The tech goliath's AI investments resulted in FCF dropping nearly 50% year over year to $25.9 billion over the trailing 12 months through Q1. But thanks to AI, the company's cloud business saw strong Q1 sales growth of 17% over 2024 to $29.3 billion.
Choosing between Alibaba and Amazon stock
Because Alibaba and Amazon have pursued similar paths to success, and both are doing well, choosing which to invest in can be challenging. One consideration is share price valuation, which can be assessed through the price-to-earnings (P/E) ratio.
Data by YCharts.
The chart shows that Amazon's P/E ratio is lower than it was a year ago, meaning its stock is now a better value, but it's still more than double Alibaba's. This indicates that Alibaba shares possess a superior valuation. Indeed, Alibaba stock looks attractively priced, since its P/E multiple is also lower than it was a year ago.
However, because both companies are pursuing dominance in the AI field, geopolitics becomes a factor to weigh as well. The U.S. government sees China as a threat in the AI era, so it's scrutinizing the Alibaba partnership with Apple. In addition, earlier this year, the Trump administration called for the delisting of Chinese stocks.
The U.S. government isn't Alibaba's only concern. The company admits that the Chinese government has "significant oversight and discretion over the conduct of our business."
Alibaba went on to explain that the Chinese "legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all." This means that Alibaba might not know it's violating a policy until the government steps in. Chinese regulations could hurt its business to the point where its stock price "could significantly decline or become worthless," according to the company.
Amazon isn't free from the effect of Chinese regulations, since China-based sellers and suppliers contribute to the company's revenue. That said, it faces lower business risk from the feud between the U.S. and China. After all, the Trump administration is not demanding Amazon's delisting.
Although Alibaba stock looks reasonably priced, Amazon's lower business risk from the U.S.-China tensions gives it the edge as the better long-term investment. The drop in its P/E ratio in recent months makes now a good time to pick up shares.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alibaba Group, Amazon, and Apple. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.