Alibaba Group’s shares are facing renewed pressure, a development that underscores the complex challenges confronting China’s tech sector. Despite the company’s aggressive and costly expansion into artificial intelligence, disappointing macroeconomic data from its home market is raising fundamental questions. Investors are increasingly skeptical about whether technological innovation alone can offset deeper structural issues within China’s economy.
The Cloud Division Emerges as a Bright Spot
A significant source of strength for Alibaba is its cloud computing arm. During the September 2025 quarter, this business unit expanded by 34%, outpacing the growth rate of any other major segment within the conglomerate. Company executives have confirmed that cloud revenue directly linked to AI services continues to grow at a triple-digit percentage pace.
This acceleration signals an important shift: Alibaba Cloud is evolving from a scale-driven operation into a genuine profit engine. The transition is driven by the nature of AI workloads, which demand substantially greater computing power than traditional cloud services, thereby increasing customer spending.
Consumer Slowdown Weighs on Sector Sentiment
The broader context for this pressure is a noticeable softening in Chinese consumer activity. Retail sales growth decelerated sharply to a meager 1.3% in November, down from 2.9% in October. This slowdown has reignited concerns about the purchasing power of Chinese households and the health of domestic consumption.
The weak data impacted the entire technology landscape. Alongside Alibaba, peers such as JD.com and Baidu also experienced selling pressure. Market participants are now reassessing the growth prospects for consumer-oriented business models in the world’s second-largest economy.
Key challenges facing the sector include:
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- A retail sales growth rate that halved within a single month
- Fierce competitive intensity from rivals like Pinduoduo, JD.com, and ByteDance
- Pressure on profit margins from rising investments in AI technology
- A persistently fragile macroeconomic environment
Alibaba’s AI Offensive Gains Momentum
Undeterred by these headwinds, Alibaba is pushing forward with its AI strategy at full speed. The company has integrated its mapping service, Amap, into the Qwen AI chatbot. This allows users to request restaurant suggestions, plan routes, and handle travel inquiries within a single, seamless conversation.
Since its launch in November, the Qwen application has seen explosive adoption. Its monthly active user count surged by 149% in just one month, reaching 18.34 million. This growth trajectory positions Qwen among the fastest-growing AI applications globally.
Furthermore, Alibaba’s family of Qwen models now tops the list of the most popular open-source AI models, with total downloads exceeding 600 million. The group is channeling $53 billion over a three-year period into AI infrastructure. Revenue generated from its AI business has already been growing at a triple-digit percentage rate for nine consecutive quarters.
Core E-Commerce Shows Signs of Stabilization
There are also positive signals emerging from Alibaba’s traditional stronghold. Revenue from its China commerce segment returned to growth, expanding by 10% in the six-month period ending September 2025. User engagement and customer retention metrics showed noticeable improvement.
While this growth does not match the historic highs of past years, investors are beginning to view the e-commerce division not as a liability but as a stabilizing foundation. It provides the essential cash flow needed to fund the ambitious investments in cloud computing and artificial intelligence.
Navigating Competing Narratives
Alibaba’s stock performance currently reflects two competing stories. On one side is the optimism generated by its advances in AI and cloud computing. On the other is the persistent anxiety over China’s economic outlook. Although the shares have gained approximately 78% since the start of the year, recent trading sessions demonstrate how swiftly sentiment can shift in response to Chinese macroeconomic data. The ultimate test for Alibaba’s AI strategy will be its ability to not just contribute to growth, but to decisively outweigh the structural challenges present in its domestic market.
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