Alibaba’s Crossroads: AI Ambitions Clash with Consumer Caution

Alibaba Group finds itself at a critical juncture, pulled in opposite directions by two powerful market forces. While its ambitious artificial intelligence initiatives generate significant optimism, persistent concerns over China’s domestic consumption and recent analyst adjustments are applying downward pressure on its shares.

A Technical Pause After Substantial Gains

The recent share price movement occurs against the backdrop of a remarkable recovery. Over the past twelve months, Alibaba’s stock has surged approximately 60%, decisively moving away from previous multi-year lows. Such robust rallies often prompt portfolio rebalancing by institutional investors. This dynamic is illustrated by Commonwealth Equity Services LLC reducing its Alibaba holding by 13.7% in the third quarter, suggesting some asset managers are securing profits following the strong performance rather than expanding their positions.

Currently trading at €129.40, the stock sits notably below its recent peak but remains well above its 200-day moving average. The 14-day Relative Strength Index reading of 29.4 indicates an oversold condition, framing the recent decline as a technical breather after an extended period of strength.

Wall Street Adjusts Near-Term Expectations

The stock faced pressure at the week’s close following downward revisions to price targets by two major Wall Street institutions. Although both firms maintain fundamentally positive ratings, they have adopted a more conservative near-term outlook.

• Morgan Stanley lowered its target from $200 to $180 while keeping an “Overweight” rating. Its analysts highlight a clear divergence within the company: the Cloud Intelligence Group is projected to deliver revenue growth exceeding 35% in the coming quarter, whereas the core domestic commerce segment grapples with sluggish consumer demand and intensified competition.
• Jefferies made a slight reduction, moving its target from $231 to $225 and reaffirming a “Buy” recommendation. The firm argues the valuation—at roughly 21 times earnings—remains attractive, but the short-term retail outlook necessitates more conservative assumptions in their financial model.

These recalibrated expectations, coming after a strong run, triggered profit-taking and exerted visible pressure on the share price last Friday.

Should investors sell immediately? Or is it worth buying Alibaba?

Strategic Levers: The AI Portfolio and Chip Access

Concurrently, Alibaba’s strategic bets in artificial intelligence are delivering tangible validation. A centerpiece is the public listing of MiniMax, a generative AI startup where Alibaba is a core investor. MiniMax shares soared 109% on their Hong Kong debut, closing at HK$345.

This performance sends a powerful message for Alibaba: the market is assigning value to the AI ecosystem the conglomerate has heavily funded in recent years. Observers suggest this implies significant, yet not fully priced, potential value may reside within Alibaba’s broader investment portfolio.

Furthermore, reports from Beijing bolster the prospects for Alibaba’s cloud division. Approval for imports of Nvidia’s advanced H200 AI chips is said to be imminent, with Alibaba potentially able to procure over 200,000 of these high-end processors. Such a development would substantially expand the group’s infrastructure for training large AI models—a critical component for remaining competitive in AI services. Official confirmation of these import licenses could counterbalance the currently burdensome news flow from the retail sector.

The Path Forward: Balancing Growth Engines

For market participants, a key technical support level now comes into focus. On a U.S. dollar basis, many are watching the $148 region, which has held during previous consolidation phases. Whether this level can be defended will likely depend heavily on upcoming quarterly results.

The central question remains: Can the rapid growth of the cloud and AI business units offset the ongoing softness in domestic commerce? Additional positive catalysts could emerge from an official confirmation of H200 chip imports and a continuation of the AI investment boom exemplified by MiniMax. The current consensus analyst price target stands around $192, indicating that substantial upside potential is still perceived—provided Alibaba can deliver the anticipated evidence of AI-driven revenue growth and margin improvement.