In a notable development for the global artificial intelligence race, Meta Platforms is turning to Chinese technology for its upcoming AI model. According to a Bloomberg report citing market sources, Meta’s new “Avocado” model, slated for launch in spring 2026, will utilize Alibaba’s open-source Qwen framework as a foundational training component. Google’s Gemma model is also reported to be part of the technological base for this closed project.
This partnership underscores the competitive stature of Alibaba’s AI research, demonstrating its capability to serve as a core building block for a leading U.S. tech giant. The move strengthens the Chinese conglomerate’s position in the intensifying battle for dominance in generative intelligence.
Despite this positive headline, investor sentiment toward Alibaba shares remains tepid. The stock was recently trading between $154 and $157, reflecting a decline of approximately 1.3% to 2.5%. The market’s cautious reaction highlights a central tension in the company’s strategy.
The Heavy Cost of Leadership
The primary weight on the share price is the immense capital required to compete at the AI frontier. Alibaba has committed a staggering $53 billion to expand its AI infrastructure. The financial impact of this spending is already visible, with capital intensity rising to 12.7% of revenue.
Should investors sell immediately? Or is it worth buying Alibaba?
The company’s financials tell a story of robust growth pressured by significant investment. Its cloud division posted impressive year-over-year growth of 34.5%, and AI-related revenues have soared, marking six consecutive quarters of triple-digit expansion. However, these substantial investments are simultaneously compressing profitability. Alibaba’s strategy appears clear: sacrifice near-term margins to secure a leading role in the long-term AI era.
Diverging Views from Market Experts
Analyst opinions on Alibaba’s path forward are split, reflecting the uncertainty surrounding its investment cycle. Citigroup has raised its price target to $225, while Sanford Bernstein has lowered its target to $190. The consensus target sits around $194, which implies a potential upside of roughly 25% from current levels.
The overall analyst rating of “Moderate Buy”—comprising 17 buy recommendations, 2 hold, and 1 sell—captures the prevailing market ambiguity. The critical question for investors is when these massive investments will begin to translate into improved cash flow. Until margins show signs of recovery, the stock is likely to remain in a volatile consolidation phase. Positive news, such as the Meta collaboration, may struggle to provide sustained momentum while expenditure continues to weigh heavily on earnings.
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