Alibaba, Tencent Lose $66 Billion as AI Plans Disappoint Investors

China’s Tech Giants Face Investor Disappointment Over AI Monetization

Alibaba Group Holding Ltd. And Tencent Holdings Ltd. Experienced a combined $66 billion market value decline in roughly 24 hours, as investors reacted negatively to a perceived lack of clarity regarding the companies’ plans to profit from artificial intelligence. The sell-off, which began on Thursday with Tencent and continued Friday with Alibaba, underscores growing anxieties about the substantial investments Chinese tech firms are making in AI without a clear path to revenue generation.

Alibaba’s US shares saw their largest drop since October, while Tencent suffered its worst single-day performance in nearly a year. The downturn reverses a recent surge in investor enthusiasm fueled by the emergence of “OpenClaw-style” AI agents – a reference to the viral popularity of AI platforms capable of automating tasks like email management and travel planning – and the expectation that these technologies would revitalize the industry. However, disappointing results and a lack of concrete monetization strategies quickly dampened that optimism.

The market’s reaction highlights a broader concern: the increasing financial commitment from China’s tech leaders to data centers, talent acquisition, and model development, without a corresponding roadmap for turning those investments into profits. While these outlays are still smaller than the $650 billion being spent by US hyperscalers like Meta and Amazon, they are occurring against a backdrop of a slowing Chinese consumer market, which is putting pressure on margins. Alibaba’s recent report of a 67% drop in quarterly net income further exacerbated these concerns.

“Investors are not pushing back on AI spending itself, but on the lack of near-term visibility on monetization,” explained Catherine Lim, a Bloomberg Intelligence analyst. “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.”

The initial excitement surrounding AI in China was driven by the rapid adoption of platforms like OpenClaw, which promised to streamline everyday tasks. Companies across the spectrum, from startups like MiniMax Group Inc. To established players like Baidu Inc., rushed to capitalize on this trend, releasing new apps and services. Tencent’s shares had briefly risen by over 10% earlier in the month, buoyed by the enthusiasm surrounding its own OpenClaw products.

Despite China’s potential advantages in AI – particularly its vast user data and control over domestic apps through platforms like WeChat – executives at both Alibaba and Tencent failed to provide specific details on how they would translate these advantages into revenue streams during recent earnings calls. They did not offer the concrete investment targets or product launches that investors were hoping 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 his Alibaba shares in December. He also noted that current geopolitical tensions in the Middle East are prompting investors to seek safer investments.

Morgan Stanley has lowered its target price for Tencent by 11% to HK$650, citing concerns that front-loaded AI investments will weigh on near-term margins and slow profit growth in 2026. Alibaba is also facing challenges in its core e-commerce business, adding to the pressure to demonstrate a return on its AI investments. The company has pledged over $53 billion to AI development and is aiming for $100 billion in cloud and AI revenue within five years.

Alibaba is attempting to monetize its growing AI portfolio, in part to offset weakness in its e-commerce division, which is facing increased competition. The company recently launched an AI service called Wukong for corporate clients and increased prices for its cloud and storage services by as much as 34%.

The current market climate, coupled with rising costs associated with acquiring users for AI-powered apps – with Alibaba, Tencent, ByteDance, and Baidu collectively spending billions of yuan in coupons during the Lunar New Year holiday – is creating a challenging environment for Chinese tech companies. Analysts at Barclays Capital have expressed concerns about Alibaba’s ability to reach its $100 billion revenue target, stating that “the market has no room for anything less than perfect.”