Alibaba at the Crossroads: A Burden or Engine for Hong Kong Stocks?

January 8, 2026 – Alibaba’s U.S. stock closed with a rare gain of more than 5%, marking a stark contrast with its relatively weak performance in the Hong Kong market recently. This divergence reflects the deeply conflicting emotions global investors feel toward the Chinese internet giant: on one hand, concerns about short-term profits, driven by its “firm commitment to increasing investment” in the instant retail battlefield; on the other, a long-term optimistic expectation for its heavy bets on AI and cloud computing, two more covert battlegrounds. After a “rollercoaster” first half of the year, where Alibaba soared only to plummet in the second half, it now stands at an unprecedented strategic crossroads. Its performance has far exceeded the scope of just one stock, becoming a key indicator of sentiment and direction for the Hong Kong stock market, particularly the Hang Seng Tech Index.Caught in a multi-front battle, will Alibaba continue to drag down the Hong Kong stock market, or will it eventually transform into a driver that leads the sector’s revaluation? Currently, all of Alibaba’s concerns in the market can be clearly visualized through two cold “bills.” The first is the visible “loss bill.” Recently, Alibaba’s management made a firm statement at an investor communication meeting: the company will continue to increase investment in Taobao Flash Sales, with the goal of becoming the “absolute leader” in the instant retail market. This means Alibaba will continue to engage in a high-intensity consumption battle. Goldman Sachs predicts that this competition could lead to an 80% year-over-year drop in Alibaba’s group EBITDA (earnings before interest, taxes, depreciation, and amortization) in Q3 of fiscal year 2026 (the fourth quarter of calendar year 2025).

Nomura Securities went even further, predicting that EBITA losses could peak at 35 billion RMB in the same quarter. UBS gave a similar forecast, estimating that commercial losses will reach 36 billion RMB. This massive investment, amounting to tens of billions, directly squeezes the profit performance of Alibaba’s core e-commerce business. Citi, in a report released on January 8, pointed out that due to factors such as the consumer environment, Alibaba’s customer management revenue growth may slow, prompting a downward revision of its earnings forecast and target price. Clearly, this “bleeding” bill is the most direct pressure hanging over Alibaba’s stock price.At the same time, Alibaba also has a second bill: an “investment bill” concerning the future. In sharp contrast to market concerns about its consumer business, institutional investors have shown rare optimism regarding the growth prospects of Alibaba Cloud. Citi firmly maintained its 35% annual growth forecast for Alibaba Cloud’s revenue, while Goldman Sachs took a more aggressive stance, raising its capital expenditure forecast for fiscal years 2026-2028 to 460 billion RMB, one of Wall Street’s most bullish forecasts, citing the ongoing transformation of AI capital expenditures reshaping growth expectations. This is not blind optimism. Alibaba Cloud’s revenue has accelerated for several quarters, and AI-related product revenue has maintained triple-digit growth for eight consecutive quarters, becoming the core driver of growth. This second bill depicts a future engine that is turning massive capital expenditure into strong, predictable growth. It is also seen by long-term investors as the company’s true “value anchor.”

Facing these two bills, the Hong Kong and U.S. markets seem to have different pricing logic. The Hong Kong market is more sensitive to short-term profits and cash flow. Since the second half of last year, under the narrative of the “takeout battle,” Alibaba’s huge loss expectations have directly suppressed its valuation, amplified by its approximate 8% weight in the Hang Seng Tech Index, dragging down the sentiment of the entire sector. During the intensifying competition, the market even briefly overlooked the valuation of Alibaba Cloud. In contrast, international capital, represented by the U.S. stock market, tends to place more weight on long-term growth stories when pricing. When Alibaba Cloud’s capital expenditures and revenue growth continuously exceed expectations, its growth narrative as “China’s core AI asset” gains traction, making it easier to attract global capital. Goldman Sachs explicitly pointed out that foreign investors are more inclined to purchase the AI growth story and treat intense local competition as a short-term variable. This is the deeper reason why Alibaba’s stock price shows a discrepancy in expectations between different markets: investors are paying for different stories.In the Hong Kong market, which is more focused on concerns from Chinese investors, can Alibaba shift from being a “burden” to an engine? The answer may lie in whether the progress of both battlefronts can converge over time. First, the instant retail battle must show clear “loss convergence” signals. The market can accept strategic losses, but it needs to see a clear path to profitability.

Guosen Securities predicted in its 2026 investment outlook that this battle may enter the “marginal investment shrinkage phase” in 2026. Once the turning point in losses is confirmed by financial reports, the heaviest stone pressing down on stock prices and sector sentiment will be lifted. Secondly, the “value realization” of cloud and AI requires continued unexpected verification. The market no longer buys into a purely technological story, but demands solid commercial results. Alibaba Cloud needs to prove that its revenue growth rate of over 30% can be sustained and, as Goldman Sachs predicts, successfully transform international business into a new growth engine. At the same time, its breakthroughs in AI models, chips, and other full-stack self-developed capabilities will need to translate into downstream applications and improved profit margins, which will become the touchstone for its valuation surge.At this point, it is too early to simply define Alibaba as either a “burden” or an engine for the Hong Kong market. It is more like a complex system undergoing an extreme “stress test,” and the Hang Seng Tech Index reflects the progress of this test. In the short term, as long as Alibaba continues to report quarterly losses of hundreds of billions, its stock price will struggle to avoid volatility, which will weigh down both the Hang Seng Tech Index and the broader Hong Kong stock market. However, looking at the longer time horizon, Alibaba’s future depends on the outcome of two battles: in the instant retail battlefield, it needs to win market share and prove efficiency; in the AI cloud battlefield, it needs to convert today’s investment into tomorrow’s dominance. This path will undoubtedly be long and filled with challenges.