Alibaba Group (NYSE: BABA), a favorite stock pick of renowned investor Michael Burry, is having a stellar year in 2025, consistently closing trading days in positive territory.

But here’s the thing: this strong upward trend is making some people wonder if BABA’s rally can keep going. Market momentum indicators are starting to suggest that the stock’s climb might be losing steam, and the latest Relative Strength Index (RSI) reading seems to back this up.

In fact, BABA’s RSI has surged into uncharted “overbought” territory, reaching a whopping 86.52 at the close of the most recent trading session.

To give you some context, the RSI is usually measured on a scale from 0 to 100. Generally, when it goes above 70, it’s considered “overbought.” This often signals that a stock might be ripe for a price correction or a period of consolidation.

BABA stock price analysis chart. Source: TrendSpider

This powerful momentum aligns with Alibaba’s significant jump in share price since late 2024. As of press time, BABA was trading at $143.75, after a solid 5.7% gain in the last trading session alone. Looking at the bigger picture, Alibaba’s stock has skyrocketed almost 70% since the start of the year!

Interestingly, even Michael Burry, famous for his savvy predictions during the 2008 financial crisis, recently trimmed his BABA holdings by 25% in the fourth quarter of 2024. Despite this reduction, BABA remains his top pick, making up a substantial 16.43% of his portfolio.

Considering the stock’s overbought status and Burry’s decision to scale back his investment in the Chinese tech giant – especially given his respected reputation – investors might want to rethink their positions in Alibaba.

BABA stock’s key fundamentals

Even with these caution flags, BABA’s upward trajectory is still going strong, fueled by some compelling underlying factors. Notably, the stock got another boost after its impressive earnings report for the December quarter.

Alibaba announced a net income of 48.945 billion yuan ($6.75 billion), which blew past analyst expectations of 40.6 billion yuan ($5.60 billion). That’s a huge leap from the 14.433 billion yuan ($1.99 billion) reported in the same period last year.

Revenue also exceeded predictions, reaching 280.154 billion yuan ($38.64 billion), compared to the forecasted 279.34 billion yuan ($38.53 billion).

Adding to the positive vibes, investors seem increasingly optimistic about a potential shift towards friendlier regulations for Chinese tech companies. Alibaba founder Jack Ma’s rare public appearance with President Xi Jinping on February 17th really reinforced this idea.

During their meeting, Xi reportedly voiced “unwavering support” for entrepreneurs, hinting at a possible easing of the regulatory pressures that have been weighing on the sector.

Beyond the regulatory landscape, Alibaba’s determined push into artificial intelligence (AI) – highlighted by six consecutive quarters of triple-digit cloud growth – puts them in a sweet spot within current market trends that favor tech companies investing heavily in AI.

And on top of all that, reports that GameStop (NYSE: GME) CEO Ryan Cohen has taken a $1 billion stake in Alibaba are sending strong signals of confidence, further energizing BABA’s rally.

Wall Street’s take on BABA stock

Meanwhile, Wall Street analysts are also generally optimistic about BABA’s prospects, with many predicting continued price appreciation.

For example, Citi analyst Alicia Yap reaffirmed her ‘Strong Buy’ rating on January 9th, and even raised her price target from $133 to $138, explaining that her previous merchandise volume estimates were too conservative.

Barclays analyst Jiong Shao also maintained a ‘Strong Buy’ rating after Alibaba’s earnings release, although he slightly lowered his price target from $137 to $130, citing concerns about profit margins due to ongoing investments.

Ultimately, while Alibaba’s solid fundamentals are definitely driving its price surge, the stock’s “overbought” condition and Burry’s reduced stake suggest it might be wise to proceed with some caution. Investors would be smart to consider whether BABA’s rally still has room to run, or if a correction could be just around the corner.

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