Alibaba stock started the year strong, jumping 75% through mid-March, propelled by excitement over AI and a partnership with Apple. But then the tariffs hit.
President Donald Trump in a series of moves during the week announced that Chinese imports are now subject to 145% tariffs, the latest in a series of retaliatory levies between the world's two largest economies. China raised its tariff on U.S. goods to 125%. The brewing trade war has weighed on shares of China's largest technology company over the past few weeks. Alibaba stock is down nearly 30% from mid-March highs.
"Tariff tensions and potential nontariff retaliation — like renewed ADR delisting threats — have added uncertainty for Alibaba," Sean Koung Sun, portfolio manager and managing director of Thornburg Investment Management, told Investor's Business Daily.
Alibaba's U.S.-listed stock is still popular among Wall Street analysts. But investor debate ahead of the tech giant's fiscal fourth quarter earnings report will likely focus on how the trade war could weigh on the cloud-computing and e-commerce company's business.
Alibaba Stock: Tariff Watch
Alibaba's U.S.-listed shares gained 5% Wednesday. Stocks rallied as Trump put a 90-day hold on his plan for broad retaliatory tariffs, though he left steep levies on China in place.
The gain for Alibaba's stock came after shares had slid 20% over just four trading days following Trump's "Liberation Day" announcement where he outlined the tariff plan.
Alibaba stock fell a half-percent to close at 104.18 on Thursday.
Meanwhile, Treasury Secretary Scott Bessent said in a TV interview Wednesday that "everything is on the table" when asked about delisting Chinese stocks.
Alibaba does not have as much exposure to the U.S. for its revenue as China e-commerce rival PDD Holdings, which operates Temu. But the company still has tariff concerns.
"There's a lot of import and consumption in China of foreign-branded products," Alibaba Chairman Joe Tsai said at a CNBC event last month. "So of course we worry about the potential tariffs. I'm pretty half glass full attitude toward that. Eventually, the tariffs being a negotiating tool maybe."
China Stimulus
Goldman Sachs economists lowered their GDP growth forecasts for China on Thursday to 4% in 2025, down from a previous 4.5%, citing tariffs. Consumer spending in the country is still recovering from a post-Covid slump which has slowed growth for Alibaba and its rival JD.com.
China's top leaders will meet to discuss measures to boost the economy and stabilize capital markets, according to a Reuters report Wednesday.
"Despite the noise, long-term investors may find opportunity here, especially if China rolls out more stimulus to support the economy," Thornburg's Sun told IBD.
Meanwhile, some analysts expect that Alibaba can navigate around tariff challenges. Bloomberg Intelligence analyst Catherine Lim wrote in a research note Tuesday that Alibaba, Temu and others China e-commerce players could continue expanding in Europe, "where fewer entrenched local rivals like Amazon in the U.S. are present."
What's Going Right For Alibaba Stock
But the uncertainty has taken a big bite out of Alibaba's rally. Shares had reached 148.43 on March 17, Alibaba's highest stock value since late November 2021. That was a near 75% gain for the year. Alibaba is now up just 23% year-to-date. Not to mention, shares are still well below the record highs near 320 that Alibaba reached in 2020.
AI helped fuel Alibaba's rally to start this year. The launch of low-cost AI models in late January from DeepSeek that compete with top U.S. offerings set off what some market watchers call a "ChatGPT moment" for China.
As the country's top cloud services provider, Alibaba has been moving quickly to roll out AI services. That includes updates to it Qwen AI large language models. The tech giant has pledged to spend more than $50 billion over the next three years on AI-related infrastructure for its cloud business.
In February, Alibaba confirmed that its AI models were picked by Apple to power new iPhone features in China. That boosted Alibaba stock as well.
The company also got a positive response to its fiscal third quarter earnings in late February. During the December-ended quarter, revenue from Alibaba's Cloud Intelligence Group increased 13% year over year to 31.7 billion yuan (about $4.37 billion), compared to estimates of 9.8% growth.
Changing Regulatory Environment
Meanwhile, a major factor in Alibaba's slide that began late in 2020 was a government crackdown on large technology firms in China. An IPO for Alibaba spinoff Ant Financial was quashed by the regulators and Alibaba Cofounder Jack Ma stepped out of the public view.
However, Alibaba stock was boosted by reports Chinese President Xi Jinping hosted a rare meeting with tech leaders that encouraged them to "show their talent." Ma was reportedly at the meeting.
That offered a sign that the government was backing away from regulatory policies on tech that had weighed on shares of companies like Alibaba and Tencent.
"It's been a 180 in terms of Beijing's approach to the sector," Sun told IBD. "That has been a key part of it," referring to gains earlier this year for Alibaba and other China tech companies.
Fiscal Q4 Results Due Soon
Alibaba is expected to release results for its March-ended fiscal fourth quarter next month. That's the next big test for the stock. But Alibaba may continue to trade with volatility amid the growing trade tensions.
Still, Wall Street likes Alibaba's long-term outlook. Roughly 93% of analysts following the stock rate it a buy, according to FactSet. That's up from 81% of analysts holding buy call one year ago.
Mizuho analyst James Lee recently named Alibaba his top pick for Asia internet stocks. He said the stock could prove a defensive play for China's uncertain economic outlook. But he was most positive on the company's AI push.
"We believe the company has rock-solid building blocks for AI investments, going from scaling model to AGI (artificial general intelligence)," Lee wrote in a March 28 client note.
Meanwhile, Alibaba stock has an IBD Composite Rating of 82 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
