PDD put all attention on price efficiency and have undercut Alibaba and have been eating their lunch. However PDD have relied on Tencent, with a stake in PDD, doing most of their marketing - which isn't exactly reliable; Alibaba has only grown about 30% sales in the last 3 years (and on declining margins), whilst PDD is still growing around 30% per year, dramatically faster.

Alibaba is also running into margin pressure, and part of this is the far greater R&D expenses. Alibaba’s downfall the last 3 years wasn’t so much the regulations as always cited, but rather good old fashioned business conpstition (what we cheer as capitalism), with other firms undercutting them and eating into their, perhaps more vigilant than us, Chinese local market, possibly better at shopping and so migrating purchases from the then larger brand Alibaba to the PDD which offered mass purchasing amongst customers organising themselves into groups.

Forward PE:
PDD - 9
Alibaba - 12

Net cash as a percent of market cap:
PDD - 30%
Alibaba - 10%

The net cash for PDD is just enormous, noting that if the two above issued a dividend for 30% and 10% respectively of their entire market cap, their forward PEs would then read as 6 and 11 respectively. So PDD’s value to a private buyer is very attractive right now, in the Ben Graham territory.

Alibaba has risen nearly 50% just year to date, but PDD has missed this. Part of the reason will certainly be PDD's higher sensitivity to tarifs, with most of Alibaba's business local and with excellent South-East Asian trading relations, but another part may be Alibaba’s flagship AI “Qwen” being deemed world-class, and PDD having no AI offering. However PDD continues to eat Alibaba’s marketshare rapidly, and in the end what will count are their relative earnings. Casting speculations and emotions aside, PDD looks more formidable - unless Alibaba’s future with AI and cloud is more lucrative than I’m able to fathom.

The trick with cloud business is to identify the various software moats, and true switching costs, within them rather than the leasable hardware itself. Alibaba lost a third of its cloud revenue a couple of years back as the largest customer - TikTok - just switched elsewhere, so much for moat).

- Manlobbi