Here is the damage, based on Hong Kong closing prices:
6 Nov: HK$104.90
11 Nov: HK$100.60
12 Nov: HK$93.80 (down
6.76%)
13 Nov: HK$90.55
(down 3.46%)
By one
estimate, Alibaba and Tencent together lost close to US$75 billion of market
value in a single week. Alibaba fell more than twice as hard as Tencent in
percentage terms. Other Chinese AI names like Z.ai and MiniMax fell even
harder. Meanwhile, Chinese chip designer Cambricon actually rallied about 22%
for the week. That contrast tells you exactly what the market is worried about.
This sell-off did not start in Hangzhou. It started in Silicon Valley. On Thursday 12 November, Nvidia's Jensen Huang stepped down as CEO after reports of extramarital affairs, including one with a former senior executive of Singapore data centre firm Megaspeed whom a US intelligence memo reportedly linked to China's Ministry of State Security. Beijing rejects this. CFO Colette Kress is now interim CEO, and the scandal has wiped almost half a trillion dollars off Nvidia's value.
Why does
this hit Alibaba? Because Washington is now in a mood to tighten chip export
controls further. House Speaker Mike Johnson has said he favours limiting those
exports, and US lawmakers are targeting a loophole that lets Chinese firms rent
advanced Nvidia chips remotely through overseas cloud data centres. One
estimate puts remote access at almost a quarter of China's computing power this
year. Alibaba Cloud is China's biggest AI cloud player, so any squeeze on chip
access goes straight to the heart of its growth story.
There is one
more twist. Reports allege Megaspeed helped reroute restricted Nvidia chips to
China, and Singapore and Malaysia are both investigating. Corporate records
show a financial trail linking Megaspeed to Alibaba through a parent company of
another firm. To be clear, that is a link in corporate records, not a finding
of wrongdoing by Alibaba. But in a jittery market, headlines like that are
enough to make funds hit the sell button first and ask questions later.
Zoom out and the picture is even more painful. Alibaba ended January 2026 at HK$169.20. At HK$90.55, it is now down about 46% from that peak and about 40% lower than a year ago.
Three things have been weighing
on the counter all year:
Profits squeezed by heavy
spending. For the June 2026 quarter, revenue grew 9% but adjusted net
profit fell 38% and missed estimates. Net profit fell 76%. Capex jumped 75% to
RMB 67.7 billion, and free cash flow was negative RMB 44.7 billion.
Share dilution. On 24
August, Alibaba placed 710 million new shares at HK$112.70 to raise HK$80
billion for chips and AI infrastructure. Those placement investors are now
sitting on a loss of about 20%, which caps any rebound near that level.
Core
e-commerce shrinking. China e-commerce revenue fell 8% in the June quarter,
while the quick commerce price war keeps eating into margins.
It is not all doom and gloom. AI cloud and compute revenue grew about 45% to RMB 48.4 billion in the June quarter, so the business Alibaba is betting on is genuinely growing fast. Alibaba still has very large cash flows and a huge user base. Philip Wool of Rayliant Advisors said he expects a buying opportunity to emerge in Alibaba and Tencent later on, for exactly those reasons.
There are
also two near-term catalysts. Alibaba reports its September quarter results on
19 November, and Trump and Xi are expected to meet at APEC in Shenzhen next
week. A good set of numbers or a calmer tone on trade could spark a sharp
relief rally. Equally, a disappointing quarter or new chip restrictions could
push the price lower still.
My honest take: Alibaba at HK$90 is a lot cheaper than it was in January, but cheap can always get cheaper. The chip curb risk is a policy risk, and nobody can forecast what US lawmakers will do in the coming weeks. Trying to catch the exact bottom of a falling knife is a game most of us will lose.
If you believe in Alibaba's
long-term AI and cloud story, here is how I would approach it:
Do not go all in at one shot. Stagger
your buying in two or three tranches over the coming weeks.
Wait for 19 November. Let
the September quarter results and the APEC meeting pass. Paying a little more
after the dust settles is better than buying blind into uncertainty.
Use spare cash only. This
should come from your excess cash pot, not your core income portfolio. Alibaba
is not an income stock. Its dividend is small and the growth story is what you
are paying for.
Keep the
position small. Size it so that another 20% drop would not keep you awake
at night.
If you are
an income investor who needs steady dividends, honestly, this is not your
counter right now. There are better places for your money while Alibaba sorts
out its profits, its capex and the geopolitics.
19 Nov 2026: Alibaba September quarter results. Watch cloud growth, capex, free cash flow and quick commerce losses.
Next week: Trump–Xi
meeting at APEC in Shenzhen.
1 Dec
2026: Closed-door interview requested by three House committees with Jensen
Huang, with more chip export curb headlines likely.
Disclaimer:
This post is for sharing and educational purposes only and is not financial
advice. Please do your own due diligence or consult a licensed financial
adviser before investing.
Ok folks,
that's all from me today. Have a great week ahead!
