Alibaba Shares Drop 2.66% Amid AI Monetization Doubts and Global Cloud Competition Trading Volume Ranks 113th

Market Snapshot

Alibaba Group (BABA) closed on February 27, 2026, with a 2.66% decline, marking its weakest performance in recent weeks. The stock traded at $144.11, down from a previous close of $148.05, amid broader market volatility in the AI sector. Trading volume reached $1.41 billion, ranking the stock 113th in intraday trading activity. Despite a projected 7.5% revenue growth for the current quarter, Alibaba’s shares have fallen 15% over the past month, reflecting investor skepticism about the sustainability of its AI-driven monetization strategies.

Key Drivers

Alibaba’s recent strategic push into AI and cloud computing has intensified competition in the sector, but the aggressive pricing of its new coding tools has raised questions about margin pressures. The company launched a low-cost AI coding platform through its cloud unit, bundling access to four major Chinese open-source models—including its own Qwen 3.5—under a single subscription plan. The entry-tier pricing starts at $1 for the first month, with a pro plan priced at $5.50 initially, aiming to lower barriers for developers and expand its AI ecosystem. While this move positions Alibaba to capture market share in the coding tools space, analysts note that discounted pricing could compress revenue per user (ARPU) and delay profitability.

The company also unveiled the Zhenwu 810E, an in-house AI chip designed for training and inference tasks. Comparable to Nvidia’s H20 processor, the chip is optimized for Alibaba’s Qwen large language models and generative AI workloads. However, regulatory uncertainties persist, as U.S. export licenses for AI hardware to China remain limited. Nvidia’s H200 chips, for instance, face delayed approvals, creating a void that Alibaba aims to fill. Yet, domestic alternatives like Moore Threads’ MTT S5000 GPU have achieved compatibility with Alibaba’s Qwen 3.5 models, signaling a growing race among Chinese chipmakers to support local AI infrastructure.

Regulatory and macroeconomic factors further weigh on the stock. A Supreme Court ruling on tariffs reduced immediate sanction risks for Chinese tech firms, offering a potential valuation floor. However, sector-wide concerns persist. Baidu’s recent earnings shortfall and profit drop have fueled doubts about whether AI investments in China’s Big Tech firms are translating into revenue. This skepticism has spilled over to Alibaba, pressuring multiples for AI-exposed names. Additionally, Alibaba’s stock has underperformed against the Hang Seng Index, which returned 3.90% year-to-date compared to BABA’s 2.21%.

The competitive landscape remains challenging. Amazon’s AWS reported $35.6 billion in Q4 2025 revenue, growing at 24%, while Alphabet’s Google Cloud surged 48% year-over-year. Alibaba’s AI capex commitments, though significant, lag behind these global peers. The company has allocated RMB 380 billion ($53 billion) over three years for AI and cloud infrastructure, but its measured pace contrasts with Amazon’s $200 billion 2026 capex plan. This spending disparity raises questions about Alibaba’s ability to scale AI capacity quickly enough to rival U.S. hyperscalers.

Finally, Alibaba’s broader ecosystem faces structural headwinds. While its Qwen 3.5 models have shown strong performance in benchmarks, the company’s pivot from e-commerce to AI has yet to fully materialize into consistent earnings growth. Analysts highlight a disconnect between long-term AI ambitions—such as pursuing artificial general intelligence (AGI)—and near-term financial metrics. With free cash flow declining and levered FCF at -$49.49 billion, investors remain cautious about whether Alibaba’s AI investments will generate returns that justify its current valuation.

Conclusion

Alibaba’s stock decline reflects a confluence of factors: aggressive AI pricing diluting margins, regulatory risks in AI hardware, sector-wide earnings underperformance, and competitive pressures from global cloud leaders. While the company’s strategic bets on AI and self-reliant chip development position it for long-term growth, immediate profitability and market confidence remain elusive. Investors will likely watch closely for signs that these initiatives can translate into sustained revenue gains and improved multiples in the coming quarters.