If you're worried about an AI bubble, Alibaba Group Holdings (BABA) CEO Eddie Wu has a message for you: relax. During the company's second-quarter earnings call on Tuesday, Wu made a pretty straightforward case for why the AI hype train isn't about to derail anytime soon.

The Math Just Doesn't Add Up for a Bubble

Wu's reasoning comes down to basic supply and demand. On the demand side, he pointed out that "we're not yet seeing any issues in terms of Scaling Law. Nobody's hit the wall yet, so to speak, in the industry." Translation: AI models are still getting better as they get bigger, and that fundamental relationship hasn't broken down.

The supply side tells an even more compelling story. Wu noted that supply has been "unable to keep up with demand" on a global scale. In fact, he expects supply constraints to remain a significant bottleneck going forward. When you've got more buyers than sellers and the product keeps getting better, that's not typically bubble territory.

"Looking ahead to the next, say, three years, we do not really see much of an issue in terms of a so-called AI bubble," Wu stated plainly.

Alibaba Delivers a Strong Quarter

The company backed up Wu's optimism with solid numbers. Alibaba reported quarterly revenue of $34.81 billion, marking a 5% increase year over year and topping the $34.43 billion analysts had penciled in.

The headline growth number undersells the actual performance. Excluding revenue from divested Sun Art and Intime units, Alibaba's top line actually jumped 15% year over year. That's the kind of underlying momentum that gives credibility to Wu's bullish AI outlook.

Earnings came in even stronger. The company posted adjusted earnings of 61 cents per American depositary share, crushing the 49-cent consensus estimate by a meaningful margin.

Price Action: Investors had a mixed reaction to the results. Alibaba's Hong Kong-listed shares slipped 1.52% on Wednesday following the earnings release. Meanwhile, its NYSE-listed shares edged up 0.41% in after-hours trading.