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Maria
Maria
August 22, 2026

Alibaba profits dropped 75 percent because of AI spending. US-listed shares fell 3 percent. JP Morgan says buy the dip. Who is right?

Alibaba just reported its worst profit quarter in years. 75 percent drop. Caused entirely by AI infrastructure spending. Shares fell 3 percent in the US. On the same day they unveiled their largest and most capable AI model yet. Sound familiar? Meta did this. Amazon did this. Microsoft is doing this. Every major tech company is destroying near-term profitability to build AI infrastructure. The difference: Alibaba is doing it while China's domestic consumer is missing every economic target. July retail sales came in at 0.6 percent year-on-year. The forecast was 1.5 percent. JP Morgan says AI will reassert market leadership in August and calls the decline a healthy rotation. Fidelity says Chinese AI models require significantly less R&D than US models, meaning the returns on investment could be higher. Is Alibaba the best AI bargain nobody in the West is talking about?

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kumar007kumar007· Aug 22

The domestic consumer data is the part that concerns me. 0.6 percent retail sales growth versus 1.5 percent expected is not a small miss. Alibaba's core e-commerce business runs on Chinese consumers spending. If they are not spending the AI investment returns get pushed further out regardless of how efficient the models are.