Alibaba Stocks Plunge Amid Ambitious AI Spending Plans
Shares of Alibaba (NYSE: BABA) fell sharply today as investors expressed concerns over the company’s hefty investments in cloud technology and artificial intelligence (AI). The stock declined by 9.7% as of 11:24 a.m. ET.
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Image source: Alibaba.
Investor Doubts Surround Major Investments
It’s not uncommon for investors to react negatively to large capital expenditure plans, and that’s exactly what’s happening with Alibaba.
The company, well-known for its Tmall and Taobao e-commerce platforms, announced plans to invest at least $53 billion in AI infrastructure over the next three years. This move aligns Alibaba with major tech firms in the U.S.
However, American companies have faced scrutiny over similar expenditures, and Alibaba is entering a similar phase of skepticism from investors. This reaction comes after a period in which the stock had risen significantly.
Also weighing on investors was news that Microsoft is canceling some leases for data center capacity in the U.S., suggesting that it may have overestimated demand for AI computing.
Implications for Alibaba’s Future
While the decision to invest heavily is not bad in itself—and mirrors the strategies of larger U.S. competitors—some skepticism from investors is understandable. Alibaba’s recent challenges, pressure from U.S. policies on China’s chip imports, and potential government crackdowns all pose risks to the stock.
A 10% drop seems excessive considering that significant investments often lead to growth. This decline follows a solid earnings report from last week, which revealed a 13% increase in cloud revenue. Savvy investors may want to view this decline as an opportunity while recognizing that the stock’s volatility may continue as the strategy unfolds.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Alibaba Group and the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
