Alibaba's stock price has extended its recent sell-off, with shares falling to $100 in premarket trading, marking a 48% decline from their highest point this year. The drop comes as Chinese technology shares broadly tumbled, erasing $2.4 trillion in market value amid growing skepticism about the artificial intelligence sector.
The Hang Seng Tech Index fell to 3,793 units, its lowest level since September 2024 and 44% below its peak last September. Other major Chinese tech firms also suffered losses: Lenovo Group dropped 10%, Hua Hong Grace Semiconductor fell 9.46%, and companies like Z.AI, Netease, MiniMax, and Semiconductor Manufacturing International all traded lower.
The primary driver behind Alibaba's decline is intensifying competition in China's AI landscape. While Alibaba holds a significant market share, rivals such as MiniMax, MoonShot, DeepSeek, and Z.ai are rapidly gaining ground. DeepSeek recently raised $15 billion, making it one of the most well-funded AI companies in the country. These domestic players also face stiff competition from international giants like Microsoft, OpenAI, and Meta Platforms.
Alibaba has been investing heavily in AI, recently raising $10 billion through a Hong Kong share sale to fund its ambitions. This spending has weighed on the company's free cash flow and profitability over recent quarters.
Despite these challenges, Alibaba's latest earnings showed resilience, particularly in its cloud business. Revenue grew 9% to $39.6 billion, with AI cloud and compute revenue surging 45% year-over-year to $7.13 billion, driven by robust AI demand domestically and abroad. However, its core e-commerce segment saw flat revenue, and the push into instant commerce—delivering products within an hour—has become highly competitive, pressuring margins.
From a technical perspective, BABA stock has been in a clear downtrend, falling from a September high of $193 to the current $100. The weekly chart shows a descending channel, and the stock is approaching a death cross as the 50-week moving average nears a crossover below the 200-week average. The price has already broken below the 61.8% Fibonacci retracement level of $109, signaling further downside potential. The next key support is at $91.96, the June low, and a break below that could trigger additional declines.
Investors remain cautious as the broader Chinese tech sector faces headwinds from regulatory uncertainty, macroeconomic pressures, and the escalating AI arms race. While Alibaba's cloud growth is encouraging, the company's ability to balance AI investment with profitability will be crucial in stabilizing its stock.
This article is for informational purposes only and does not constitute financial advice.
