Alibaba, Tencent shed $84 billion after AI vision falls flat

HONG KONG – Alibaba Group Holding and Tencent Holdings bled US$66 billion (S$84 billion) of value in roughly 24 hours, after the market punished the twin leaders of China’s tech arena for failing to lay out clear visions for how to profit off artificial intelligence. 

Alibaba’s US shares fell their most since October 2025, following Tencent’s worst drubbing in almost a year on March 19. Investors that had piled into the sector’s biggest names over the past week – betting that the advent of OpenClaw-style AI agents would galvanise the industry – reversed course after disappointing results, with no clear path to monetisation in sight.

The dramatic reaction reflects investors’ anxiety about the increasing amounts that China’s tech leaders are ploughing into data centres, talent hires and model development – without a road map to actual revenue. 

While those outlays remain a fraction of the US$650 billion that US hyperscalers like Meta Platforms and Amazon.com are spending in 2026 alone, the rising budgets coincide with a Chinese consumer downturn that is compressing margins. Alibaba reported a 67 per cent drop in quarterly net income, exacerbating those concerns.

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

Tencent’s Hong Kong shares were down 0.5 per cent on March 20 after shedding US$43 billion of market value in New York on March 19. Alibaba’s US-listed shares lost US$23 billion overnight, while its Hong Kong stock was down 5.8 per cent on March 20.

The market’s about-face stems in part from a burst of exuberance in March, when Chinese consumers returned from their Lunar New Year breaks to fall head-over-heels for OpenClaw – a viral agentic AI platform that promises to take over a litany of mind-numbing tasks from managing e-mail inboxes to arranging travel itineraries. 

From fledgling firms such as MiniMax Group to incumbents like Baidu, companies scrambled to release apps and services to tap that frenzy, feeding optimism around the technology. Tencent’s shares gained more than 10 per cent at one point earlier in March, riding excitement about its OpenClaw products.

China’s most valuable firm is considered well-positioned to build agentic AI because it sits on a trove of user data, and controls access to a universe of domestic apps via WeChat. Such services tend to perform best when granted access to users’ information, like message logs. 

But executives fell short of specifics when plied with questions on post-earnings calls about how the company would turn its built-in advantages into money spinners. They did not provide the concrete investment targets or specific products that many investors had hoped for.

Morgan Stanley slashed its target price for the firm by 11 per cent to HK$650. “These front-loaded AI investments will likely weigh on near-term margins, driving profit to grow more slowly than revenue in 2026,” analysts wrote.

In Alibaba’s case, it is also grappling with a slowdown in its core business. Alibaba is considered a front runner in China’s race towards artificial general intelligence. It is also the most aggressive in terms of spending: It pledged more than US$53 billion of AI investment over several years. On March 19, it declared a target of US$100 billion of cloud and AI revenue in five years.

It is now keen to monetise a growing AI portfolio in part to counter weakness in its e-commerce division, which is grappling with fierce domestic competition. The company this week launched an agentic AI service known as Wukong for company clients, and hiked prices for its cloud and storage services by as much as 34 per cent. 

At the same time, costs are rising on other fronts. Over February’s week-long Lunar New Year holiday, Alibaba, Tencent, ByteDance and Baidu gave out billions of yuan in coupons to acquire users for their consumer-facing agentic apps.

“We do share market concerns around the visibility for Alibaba to reach US$100 billion annual cloud and AI revenue in five years,” Barclays Capital analysts wrote in a note after trimming their target on the firm. The market has “no room for anything less than perfect”. BLOOMBERG