Alibaba and Tencent lost a combined $66 billion in market value in roughly 24 hours, as investor optimism around AI gave way to concerns about rising costs and unclear returns.
Tencent led the drop, losing about $43 billion in a single session — its worst in nearly a year. Alibaba followed, with its US-listed shares falling overnight and its Hong Kong stock down as much as 6.4% by Friday morning, wiping out another $23 billion.
The selloff comes after a short rally driven by renewed excitement around agentic AI. Interest surged following the rise of OpenClaw, which went viral among Chinese users after the Lunar New Year, fuelling expectations that companies like Alibaba and Tencent could unlock new commercial opportunities.
Tencent’s shares had gained more than 10% at one point during that period.
Heading into earnings, investors were looking for clarity on how AI spending would translate into revenue.
Alibaba has committed more than $53 billion to AI investment, launched an enterprise agentic AI service called Wukong, and set a target of $100 billion in combined cloud and AI revenue within five years. It also raised prices on cloud and storage services by as much as 34%.
Tencent, through WeChat, holds a central position in China’s digital ecosystem, with access to user data and services that could support agent-based AI systems.
But during post-earnings calls, executives failed to provide concrete timelines or product-level detail on monetisation — a key gap that investors had been waiting to see addressed.
Alibaba’s earnings added pressure. The company reported a 67% drop in quarterly net income alongside its AI spending plans.
At the same time, China’s consumer slowdown is compressing margins, while Alibaba’s core e-commerce business faces intense domestic competition. Rising AI costs are adding to that strain.
Analysts moved quickly after the results.
Morgan Stanley cut its price target on Tencent by 11% to HK$650. Analyst Gary Yu wrote that “front-loaded AI investments will likely weigh on near-term margins,” adding that profit could grow more slowly than revenue in 2026.
Barclays also lowered its target on Alibaba. Analyst Jiong Shao said the market currently has “no room for anything less than perfect.”
The core concern is not the spending itself, but the lack of visibility on returns.
Bloomberg Intelligence analyst Catherine Lim said investors are waiting for clearer signs that AI is generating real revenue. “The key inflection will be when companies can show that AI is driving measurable revenue uplift, whether through cloud, advertising, or transaction conversion,” she said. “Until then, markets will likely stay cautious.”
That caution is showing up now.
The pressure is not limited to Alibaba and Tencent. US tech companies, including Meta and Amazon, are collectively expected to spend around $650 billion on AI infrastructure this year.
In China, competition is also driving up costs. During the Lunar New Year period, Alibaba, Tencent, ByteDance, and Baidu distributed billions of yuan in consumer incentives to attract users to their AI products.
Investors had priced in AI-driven growth. What they got instead was rising spending, falling profits in some areas, and limited clarity on when returns will materialise.
As analysts at Morgan Stanley and Barclays flagged, the missing piece is a clear, near-term path from AI investment to measurable revenue.
Until that becomes visible, volatility is likely to remain.
Damilare Odedina
