Alibaba Stock: China’s Economic Woes Cast a Shadow – Can AI and Cloud Growth Save the Day?

• Why Is Alibaba’s Stock Under Pressure Despite a Strong 2025 Performance?
• How Does China’s “Two-Speed Economy” Impact Alibaba?
• Can Cloud Computing and AI Offset E-Commerce Weakness?
• Technical Analysis: Is Alibaba Stock Oversold?
• Strategic Crossroads: Hold, Buy, or Bail?
• Historical Context: How Does This Compare to Past Downturns?
• What Are Institutional Investors Doing?
• The Bottom Line: Patience Required
• Alibaba Stock: Key Questions Answered

Alibaba’s stock, despite a stellar 50% year-to-date gain in 2025, faces headwinds as disappointing Chinese retail data reignites fears of a prolonged consumer slump. While the tech giant bets big on AI and cloud computing, its core e-commerce business remains vulnerable to macroeconomic turbulence. This deep dive explores the dual-speed Chinese economy, Alibaba’s strategic pivots, and whether the stock’s current oversold RSI signals a buying opportunity or more pain ahead.

Why Is Alibaba’s Stock Under Pressure Despite a Strong 2025 Performance?

Alibaba (NYSE: BABA) has been one of 2025’s standout performers in the tech sector, delivering a 50% year-to-date return that outpaced most peers. However, the stock recently hit turbulence after China’s National Bureau of Statistics reported alarming retail sales figures. November’s meager 1.3% year-over-year growth marked the weakest performance since China lifted strict COVID restrictions in December 2022 – far below the 2.8% consensus estimate. The slowdown was particularly pronounced in big-ticket categories: home appliances and consumer electronics plummeted nearly 20%, while cosmetics – typically a bright spot – lost momentum. This sent shockwaves through China’s e-commerce sector, dragging down rivals JD.com and Baidu alongside Alibaba.

How Does China’s “Two-Speed Economy” Impact Alibaba?

The latest data highlights what economists call China’s “two-speed economy” – a growing divergence between technology-driven sectors and traditional consumption. While AI and cloud computing flourish, consumer spending remains hamstrung by the ongoing property crisis. With 70% of Chinese household wealth tied to real estate, falling property values have created a negative wealth effect. For Alibaba, this poses an existential challenge: Taobao and Tmall, which account for over 60% of revenue, depend heavily on discretionary spending. “It’s like trying to accelerate with the parking brake on,” remarked BTCC analyst Li Wei in a recent note. “Every yuan invested in cloud infrastructure is a yuan not spent on Tmall promotions.”

Can Cloud Computing and AI Offset E-Commerce Weakness?

Alibaba’s Q3 earnings revealed a tale of two businesses: Cloud revenue grew 34% annually, driven by demand for AI services, while Core commerce stagnated. The company is aggressively investing in AI infrastructure and “Quick Commerce” (ultra-fast delivery services), sacrificing short-term profitability – adjusted EBITDA plunged 78% last quarter. Wall Street remains cautiously optimistic; Citigroup raised its price target to $150, citing Alibaba’s “unrivaled position in China’s AI arms race.” However, as TradingView data shows, the stock’s forward P/E of 12 remains below its 5-year average, reflecting persistent concerns.

Technical Analysis: Is Alibaba Stock Oversold?

The recent pullback has left Alibaba shares trading at €125.40, 22% below their 52-week high. The Relative Strength Index (RSI) of 29.4 suggests the stock is oversold – historically a precursor to bounces. Chartists note strong support at €120, a level tested successfully three times since June. The next catalyst arrives on February 19, 2026, with Q4 earnings. Until then, the stock’s fate hinges on whether Beijing’s stimulus measures can revive consumer confidence. “This isn’t just about Alibaba,” notes Susquehanna’s tech analyst. “It’s a referendum on China’s ability to rebalance its economy.”

Strategic Crossroads: Hold, Buy, or Bail?

Alibaba finds itself at a strategic inflection point. The cloud division could become China’s answer to AWS, but only if management navigates three challenges: 1) sustaining R&D spend amid profit pressures, 2) fending off state-backed rivals like China Mobile Cloud, and 3) avoiding U.S. tech sanctions. Retail investors appear divided – options activity shows surging interest in both $150 calls and $100 puts. As one hedge fund manager quipped, “In China, even the clouds have silver linings… and regulatory risks.”

Historical Context: How Does This Compare to Past Downturns?

The current slump echoes Alibaba’s 2015-2016 growing pains, when investments in mobile payments and video streaming temporarily squeezed margins. Back then, the stock rebounded 87% within 18 months as monetization improved. However, today’s macroeconomic backdrop is more challenging, with China’s property crisis adding systemic risk. On the positive side, Alibaba’s international commerce (led by Lazada and AliExpress) grew 53% last quarter – a potential hedge against domestic weakness.

What Are Institutional Investors Doing?

Filing data reveals mixed signals: While Bridgewater added 2.3 million shares in Q3, Soros Fund Management trimmed its position by 15%. Notably, Alibaba’s Hong Kong-listed shares (9988.HK) have seen consistent buying from mainland investors via Stock Connect, suggesting differing views between local and international money. “The divergence tells you everything,” observes a Morgan Stanley trader. “Domestic investors see policy support coming; global funds worry about geopolitical premiums.”

The Bottom Line: Patience Required

Alibaba’s transformation from an e-commerce pure-play to a diversified tech conglomerate will take years, not quarters. The stock offers compelling value for long-term investors willing to stomach volatility, but those seeking quick gains might find better opportunities elsewhere. As always in China markets, politics could TRUMP fundamentals – any escalation in U.S.-China tech tensions would hit Alibaba hardest among its peers. This article does not constitute investment advice.

Alibaba Stock: Key Questions Answered

Is Alibaba stock a buy in December 2025?

With an oversold RSI and 22% below highs, Alibaba appears technically due for a bounce. However, fundamental concerns about China’s consumption slowdown suggest any rally might be short-lived until retail data improves.

How much of Alibaba’s revenue comes from cloud computing?

Cloud accounted for 11% of Q3 2025 revenue (¥26.7 billion), up from 8% a year ago. While growing rapidly, it remains far smaller than CORE commerce (68% of revenue).

What’s the biggest risk facing Alibaba?

Regulatory uncertainty tops the list – both from Chinese domestic policies (like recent fintech crackdowns) and potential U.S. restrictions on AI technology exports.