Alibaba Plunges 16.2% in 6 Months: 3 Key Reasons to Hold the Stock

Alibaba (BABA) shares have dropped 16.2% over six months, even as its AI Cloud revenue climbed 45% year-over-year. The split between top-line momentum and bottom-line pressure defines the setup.

AI products have posted 12 consecutive quarters of triple-digit growth. Alibaba backs that run with a full-stack AI strategy that spans proprietary chips and its Qwen models.

The cost is steep. Capital expenditure hit RMB67.68 billion, and adjusted EBITA fell 30%. Free cash flow turned negative. That is the core tension: aggressive AI buildout is buying growth while compressing near-term profitability.

Cushioning the spend is a balance sheet holding RMB474.5 billion. Zacks Investment Research argues that existing holders should stay put given those fundamentals, while new buyers should wait for a better entry point, citing near-term margin pressure and a premium valuation.

Interpretation: the market appears to be pricing the cash burn more heavily than the cloud growth. The 16.2% slide fits a narrative in which investors want proof that capex converts into earnings before paying a premium multiple.