Why Polaris Capital Continues Watching Alibaba (BABA) Amid AI Opportunity and China Market Challenges

Why Polaris Capital Continues Watching Alibaba (BABA) Amid AI Opportunity and China Market Challenges

Wed, September 23, 2026 at 4:57 PM GMT+3 3 min read

• BABA -4.33%

Polaris Capital Management, an investment management company, released its second-quarter 2026 investor letter for "Global Equity Strategy". The letter can be downloaded here. Global markets delivered strong gains during the quarter, supported by an AI-driven earnings rally despite elevated interest rates, inflation concerns, and geopolitical uncertainty. Polaris Global Equity Composite (net of fees) returned 13.26% during the quarter, compared to a 13.90% return for the MSCI World Index, gross dividends reinvested. The Composite remained ahead for the year-to-date period through June 30, 2026, gaining 19.95% versus 9.94% for the benchmark, driven by strong performance from IT holdings, particularly AI-related companies and memory semiconductor suppliers. Please review the Fund's top five holdings to gain insights into its key selections for 2026.

In its second-quarter 2026 investor letter, Polaris Global Equity Strategy highlighted Alibaba Group Holding Limited (NYSE:BABA). Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational company that focuses on cloud computing, e-commerce, and artificial intelligence. On September 22, 2026, Alibaba Group Holding Limited (NYSE:BABA) closed at $116.31 per share. Over the past month, Alibaba Group Holding Limited (NYSE:BABA) declined 2.94%, and its shares lost 34.08% over the past 52 weeks. Alibaba Group Holding Limited (NYSE:BABA) has a market capitalization of $291.05 billion, and its stock has traded within a 52-week range of $91.99 to $192.67.

Polaris Global Equity Strategy stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2026 investor letter:

"Alibaba Group Holding Limited (NYSE:BABA) faced multiple headwinds, including a U.S. military blacklist designation, concern that its $1.5 billion bid for grocery-delivery firm Pupu would deepen exposure to low-margin price-war segments, and distillation allegations from Anthropic that could invite U.S. technology sanctions."

Alibaba Group Holding Limited (NYSE:BABA) ranks 30 on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. As per our database, 97 hedge fund portfolios held Alibaba Group Holding Limited (NYSE:BABA) at the end of the second quarter which was 102 in the previous quarter. While we acknowledge the potential of Alibaba Group Holding Limited (NYSE:BABA) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Alibaba Group Holding Limited (NYSE:BABA) and shared how the company's new AI chip could create a challenge for Nvidia in China. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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This article is originally published at Insider Monkey.