(March 20): Alibaba Group Holding Ltd and Tencent Holdings Ltd lost US$66 billion ($84.47 billion) of market value in roughly 24 hours, after the market punished the twin leaders of China’s tech arena for failing to lay out clear visions for how to profit off artificial intelligence.
Alibaba’s US shares fell their most since October, following Tencent’s worst drubbing in almost a year on Thursday. Investors that had piled into the sector’s biggest names over the past week — betting the advent of OpenClaw-style AI agents would galvanise the industry — reversed course after disappointing results, with no clear path to monetization in sight.
The dramatic reaction reflects investors’ anxiety about the increasing amounts that China’s tech leaders are plowing into data centres, talent hires and model development — without a roadmap to actual revenue.
While those outlays remain a fraction of the US$650 billion that US hyperscalers like Meta Platforms Inc and Amazon.com Inc are spending this year alone, the rising budgets coincide with a Chinese consumer downturn that’s compressing margins. Alibaba reported a 67% drop in quarterly net income, exacerbating those concerns.
“Investors are not pushing back on AI spending itself, but on the lack of near-term visibility on monetization,” Bloomberg Intelligence analyst Catherine Lim said. “The key inflection will be when companies can show that AI is driving measurable revenue uplift, whether through cloud, advertising, or transaction conversion. Until then, markets will likely stay cautious.”
See also: Alibaba targets US$100 bil of AI revenue in five years
Tencent held steady after shedding US$43 billion of market value Thursday. Alibaba’s US-listed shares lost US$23 billion overnight, while its Hong Kong stock was down as much as 6.4% in early Friday trade.
The market’s about-face stems in part from a burst of exuberance this month, when Chinese consumers returned from their Lunar New Year breaks to fall head-over-heels for OpenClaw — a viral agentic AI platform that promises to take over a litany of mind-numbing tasks from managing email inboxes to arranging travel itineraries.
From fledging firms such as MiniMax Group Inc to incumbents like Baidu Inc, companies scrambled to release apps and services to tap that frenzy, feeding optimism around the technology. Tencent’s shares gained more than 10% at one point earlier this month, riding excitement about its OpenClaw products.
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China’s most valuable firm is considered well-positioned to build agentic AI because it sits on a trove of user data, and controls access to a universe of domestic apps via WeChat. Such services tend to perform best when granted access to users’ information, like message logs.
But executives fell short of specifics when plied with questions on post-earnings calls about how the company would turn its built-in advantages into money spinners. They didn’t provide the concrete investment targets or specific products that many investors had hoped for.
“Recent results from Tencent and Alibaba have only added to doubts about the returns and margins from their massive investments,” said Paul Pong, managing director at Pegasus Fund Managers Ltd, who sold Alibaba shares in December last year. “At the same time, Middle East tensions make it extremely difficult to take advantage of dips in Chinese AI stocks.”
Morgan Stanley slashed its target price on Tencent by 11% to HK$650 ($106.18). “These front-loaded AI investments will likely weigh on near-term margins, driving profit to grow more slowly than revenue in 2026,” analysts including Gary Yu wrote.
In Alibaba’s case, it’s also grappling with a slowdown in its core business.
Alibaba is considered a frontrunner in China’s race toward artificial general intelligence. It’s also the most aggressive in terms of spending: it pledged more than US$53 billion of AI investment over several years. On Thursday, it declared a target of US$100 billion of cloud and AI revenue in five years.
It’s now keen to monetise a growing AI portfolio in part to counter weakness in its e-commerce division, which is grappling with fierce domestic competition. The company this week launched an agentic AI service known as Wukong for company clients, and hiked prices for its cloud and storage services by as much as 34%.
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“At this moment the war in the Middle East is driving funds toward safer investments,” said Vey Sern Ling, a managing director at Union Bancaire Privee. “China tech companies in a spending phase with high uncertainty of returns is not one of them. Of course the narrative can change quickly if the war ends.”
Meanwhile, costs are rising on other fronts. Over last month’s week-long Lunar New Year holiday, Alibaba, Tencent, ByteDance Ltd and Baidu Inc gave out billions of yuan in coupons to acquire users for their consumer-facing agentic apps.
“We do share market concerns around the visibility for Alibaba to reach US$100 billion annual cloud and AI revenue in five years,” Barclays Capital Inc analysts including Jiong Shao write in a note after trimming their target on the firm. The market has “no room for anything less than perfect”.
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