To bolster its cloud business, Alibaba plans to invest over $50 billion in AI-related infrastructure over the next three years.

Despite a 7% year-on-year increase in total sales to 236.4 billion yuan ($32.6 billion), Alibaba's recent quarterly results missed market expectations, particularly in net income.

Shares of Alibaba fell by as much as 4.8% on May 19, 2025, in Hong Kong, driven by potential U.S. scrutiny of an AI partnership with Apple.

The decline in both companies' shares follows reports that U.S. officials are investigating Apple's plan to utilize Alibaba's AI technology for iPhones sold in China.

China is Apple's second-largest market, but recent sales dropped by 2.3%, highlighting the need for a strong AI partner like Alibaba to remain competitive.

Analyst sentiment around Alibaba is shifting, with a rise in 'Underperform' ratings and a decrease in 'Buy' ratings, reflecting growing investor concerns.

On the stock market, Alibaba's shares dropped to $121.95, falling below the 21-day moving average, while Apple's stock decreased by 1.7% to $207.60.

In a competitive landscape, Alibaba is vying with other Chinese tech giants like Baidu and Tencent, as well as startups to establish a leading AI model.

Analysts warn that increased regulatory scrutiny could hinder Alibaba's growth potential in cloud and AI sectors, with some suggesting that U.S. opposition might limit its opportunities.

The company's earnings report revealed revenue below analyst expectations, contributing to an 8% decline in stock value as investors reacted negatively.

Only Alibaba has publicly acknowledged the AI partnership with Apple, while Apple has not commented on the reported agreement.

This situation underscores the challenges faced by U.S. tech companies in China, where fluctuating regulatory demands and geopolitical tensions complicate operations.