At first glance, some investors might wonder why Warren Buffett and his company, Berkshire Hathaway, have never taken a position in Chinese tech giant Alibaba (NYSE: BABA). As the leading e-commerce player in China, Alibaba shares many similarities with Amazon—a major Berkshire holding—making it a seemingly logical investment target. While Alibaba possesses several characteristics of a “Buffett-style stock,” investors should still carefully evaluate its potential.
Analyzing whether Alibaba meets Buffett’s investment criteria may offer valuable insights for retail investors.
First, as a dominant player in one of the world’s largest e-commerce markets, Alibaba’s industry leadership aligns with Buffett’s “economic moat” philosophy. The stock currently trades at a P/E ratio of just 15.6—less than half the average of the S&P 500—and significantly below Amazon’s 35 and MercadoLibre’s 61, highlighting its attractive valuation.
Financially, while fiscal Q1 2026 (ended June 30) revenue of $35 billion grew only 2% year-over-year (slowing from 6% in fiscal 2025), net income surged 76% to $5.9 billion. Analysts expect revenue to grow 6% this year, with EPS reaching $62.47, and rising to $75.19 next year. Combined with a 77% profit increase in fiscal 2025, the current P/E ratio appears highly compelling.
Moreover, Buffett’s team is no stranger to Chinese assets: Berkshire previously held BYD for an extended period, and Buffett’s longtime partner Charlie Munger invested in Alibaba in 2021.
However, Munger quickly reversed course, calling the Alibaba investment a “mistake” and describing it as “highly competitive.” After observing regulatory reactions to comments by Alibaba co-founder Jack Ma, he deemed Chinese stocks generally risky and began selling shares.
For U.S. investors, ownership of Alibaba is only possible through American Depositary Receipts (ADRs), but risks extend beyond structural limitations. In 2021, the SEC threatened to delist Chinese companies due to insufficient financial transparency. Although a temporary agreement was reached, the threat has resurfaced recently.
More critically, geopolitical concerns played a role when Buffett swiftly divested Berkshire’s position in TSMC in 2022, citing “geopolitical tensions related to China.” Despite Berkshire’s ownership of BYD and Apple’s heavy reliance on Chinese manufacturing, these risks help explain why Alibaba’s stock has risen only 40% over its 11-year U.S. listing history.
Conclusion：While Alibaba exhibits the growth potential and valuation appeal that Buffett often looks for, regulatory uncertainty, geopolitical tensions, and ADR-related risks have likely deterred his investment. For ordinary investors, this suggests caution remains necessary—even if the numbers seem enticing at first glance.
