BABA Stock Slips Overnight: Alibaba’s AI Spending Draws Investor Scrutiny, Analysts Split
Alibaba’s $10.2 billion equity raise and expanding AI investment have divided Wall Street. Bernstein reduced its target despite retaining Outperform, while Bank of America raised its outlook on cloud growth and potential earnings from new computing capacity.
Alibaba Group (BABA) stock slipped more than 1% overnight after falling over 4% last week, extending its losing streak to four weeks. Shares have declined more than 22% year to date, while retail sentiment on Stocktwits remains bearish. The debate centers on Alibaba’s $10.2 billion equity raise and whether increased AI spending can generate attractive returns. CEO Eddie Wu said the company will increase investment in AI, including infrastructure supporting its technology. Bernstein lowered its price target to $165 from $180 but maintained an Outperform rating, implying 45% upside to the stock’s last closing price. The firm acknowledged investor frustration because Alibaba held $30.7 billion in net cash when the deal was announced, weakening confidence in management’s earlier arguments about returns on investment. However, Bernstein’s review still supports the possibility of reasonable paybacks from the company’s capital projects. Bank of America took a more constructive view. Analyst Joyce Ju raised the target to $175 from $172 and retained a Buy rating, implying 54% upside. BofA increased its Alibaba cloud-revenue growth forecasts for fiscal 2027, 2028 and 2029 to 51%, 56% and 41%, respectively. The estimates assume newly added computing capacity will support revenue from outside customers and contribute to earnings beginning in fiscal 2028. Alibaba sold 710 million shares at HK$112.70, or $15.65, each, with institutional demand reaching nearly three times the shares available. Proceeds will expand its AI business and supporting infrastructure. Founder Jack Ma bought more than HK$600 million of Alibaba shares in Hong Kong. Chairman Joe Tsai and CEO Eddie Wu together bought about HK$202 million. Investors must weigh dilution and execution risk against potential cloud expansion and improved future earnings.