Alibaba Shares Slide as Jefferies Slashes Price Target Over AI Spending and Business Losses

Alibaba's Hong Kong-listed shares (HK:9988) dropped 2.9% to HK$122.70 on Thursday, emerging as one of the heaviest drags on the Hang Seng Index, which closed 0.6% lower. The selloff came after investment bank Jefferies trimmed its price target on Alibaba's U.S.-listed shares (NYSE:BABA) from $212.00 to $185.00, citing mounting concerns over rising artificial intelligence expenditures and widening losses across the company's non-core business segments.

Despite the price target reduction, Jefferies maintained its Buy rating on the stock, signaling continued long-term confidence in the Chinese e-commerce and technology giant. The revised valuation reflects growing pressure from Alibaba's aggressive push to promote its Qwen AI platform, particularly during the high-stakes Lunar New Year shopping season. Earlier this year, Alibaba committed 3 billion yuan — roughly $431 million — toward holiday promotions, with a significant portion directed at driving user adoption of the Qwen AI application.

Jefferies acknowledged that Alibaba's recently launched AI text-to-video tool, Happy Horse, gained solid traction with users. However, the elevated marketing and promotional spend surrounding its AI ecosystem is expected to weigh on near-term earnings. In addition, the bank flagged that Alibaba's "All Others" segment — which encompasses its non-core and retail operations — is projected to report wider losses for the March quarter, driven by increased subsidies and promotional activity.

On a more encouraging note, Jefferies anticipates improvement in Alibaba's quick commerce losses during the same quarter. Looking further ahead, the brokerage forecasts that fiscal year 2027 losses in this segment could be cut in half compared to the prior year, suggesting that current spending may yield longer-term operational efficiencies.

Investors and analysts continue to monitor Alibaba's balancing act between heavy AI investment and sustainable profitability growth across its diversified business portfolio.