Analyst Adam Levy predicts Alibaba Group could surpass Micron Technology's market cap by the end of next year. Micron, a leading DRAM chipmaker, has seen its stock price surge due to high demand for its chips used in AI infrastructure. However, the author believes Alibaba's growth potential in cloud computing and quick commerce positions it for stronger earnings.

Alibaba is investing heavily in cloud computing capacity, with capital expenditures reaching $4.4 billion in the third quarter. The e-commerce giant's quick commerce efforts, aiming for one-hour deliveries, have initially cut into profitability. Nevertheless, unit economics are improving, fueling expectations of robust earnings growth. Analysts predict a 40% rise in earnings per share next year.

Micron's ability to sustain pricing power depends on the chip industry's build-out, with management projecting tight supply through 2026. As supply and demand move toward equilibrium, its margins may compress. However, Alibaba appears undervalued, with a forward P/E of 26, given its growth prospects.

The Motley Fool Stock Advisor identified other top stocks to buy, but Alibaba Group wasn't one of them. Investors should watch Alibaba's continued expansion in cloud and quick commerce. This could signal a shift in the AI sector as the market continues to evolve.