Investors may be concerned about the blistering pace of AI investment set by U.S. companies
Shares of Chinese e-commerce giant Alibaba (HKG: 9988) slid by more than 2% on Monday after the firm revealed plans to spend more than $53 billion on AI infrastructure projects in the next three years.
Per Alibaba’s official blog, the plans will include the development of data centres and cloud networks, and will underscore an attempt to become “a leading global cloud provider”.
The spending commitments set a new record for the largest AI hardware investment ever by a Chinese company, and exceed Alibaba’s total spend on AI over the past decade.
But the plans were met with a mixed reception from shareholders. Despite an initial uplift in early morning trading, shares of Alibaba saw dips of more than 3% throughout the session, and remained down 2.02% by the closing bell.
While impressive by Chinese standards, investors may be expressing concern about Alibaba’s AI commitments compared to those of other major tech and e-commerce players. Meta, for instance, anticipates spending $65 billion on AI in FY25, while Microsoft has earmarked some $80 billion.
Correction likely for Alibaba stock
However, being primarily an e-commerce brand, Alibaba is a relative newcomer to the world of artificial intelligence. Chinese firms are generally also priced out of buying the most sophisticated chipsets from US-based companies like Nvidia, meaning their hardware costs are curtailed.
The firm has also been enjoying impressive growth lately, posting a net income of $6.72 billion last week, its fastest pace of revenue growth in more than a year.
Investors welcomed the impressive results, with share prices surging close to 15% in the aftermath. Consequently, Alibaba has gained more than $100 billion in market value so far this year.
The company has also demonstrated a keen and progressive approach to artificial intelligence, investing in a handful of promising Chinese startups, including Moonshot and Zhipu.
Taking all of this into account, an imminent correction is likely for Alibaba stock.
