Chinese e-commerce giant Alibaba Group (NYSE: BABA) has this week launched a newly developed server chip. The chips will not be sold directly to customers, but will instead be utilized in the company’s cloud computing offerings. Customers will be able to benefit by purchasing services, such as cloud storage and artificial intelligence applications, based on the new technology. This new chip will propel the company into competition with cloud computing leaders like Microsoft and Amazon.
So what does this mean for investors?
Currently, Alibaba is China’s largest cloud computing company. It holds a 33.8% market share, outperforming the nearest competitor Huawei by almost 15%. However, the company’s growth in this area is slowing as competitors rush to make up ground. The new chip will enable Alibaba to become more of a player in the global market. Alibaba has aggressively invested in global cloud computing already this year by opening two data centers outside of China and through the launch of a cloud-based live streaming product targeted at the online shopping industry.
Despite still trailing the market leaders in Microsoft, Amazon, and Google, Alibaba investors should take note of the attempts to rapidly expand one of its long-term key profit drivers into new territories. October has seen a rally in share price following a sharp drop throughout the previous year, up over 20% from a low of $138.43 at the beginning of the month.
So should I buy Alibaba stock?
Following massive volatility amongst Chinese stocks this year, increased government regulations on its own conglomerates, and a $2.8 billion anti-monopoly fine in April; this hasn’t been the best year to be an Alibaba shareholder. Prices are only beginning to experience a small rally from lows not seen since before 2019. However, considering the volatility of Chinese stocks this year and the impending national data privacy laws, it might be best to avoid Alibaba stock for the time being.
Are you looking for that right company to kickstart your portfolio? Look no further than MyWallSt, where our shortlist of market-beating stocks will take you to the next level. Don’t believe us? Why not start a free trial today?
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.