A portfolio manager responsible for $17 billion in assets stated that Alibaba's current stock price only reflects its e-commerce operations, failing to account for its artificial intelligence potential.

In recent months, global concerns over AI spending levels by major hyperscale data center operators, coupled with ongoing price competition in China, have weighed broadly on technology stocks, stalling Alibaba's significant rebound momentum. The company's Hong Kong-listed shares have declined 26% from their October peak.

Christian Heck, a New York-based portfolio manager at First Eagle Investments Management, remarked that the Chinese firm's well-known online retail business provides a "margin of safety," while its AI initiatives are "effectively free, or if you analyze it closely, akin to a complimentary call option."

"This configuration is quite appealing," Heck noted during an interview on Tuesday. Over the past year, the First Eagle Overseas Fund, which he co-manages, has delivered a 31% return, outperforming 85% of its peers.

Heck emphasized that Alibaba's appeal extends beyond this, highlighting its diverse AI portfolio—encompassing infrastructure, proprietary models, and open-source technologies—which distinguishes it from specialized tech firms like OpenAI and Oracle that focus on particular niches.

"They possess a remarkably strong AI business across the entire technology stack, which is quite uncommon," Heck observed. He added that Alibaba's AI operations "could evolve into a highly profitable and substantial market."

First Eagle, a fund focused on identifying high-quality companies at low valuations, invested in Alibaba three years ago. Currently, Alibaba trades at about 16 times its projected earnings over the next 12 months, significantly below its recent peak of nearly 22 times.