Market Pullback as AI Stocks Face Pressure
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 46 minutes ago
0mins
Should l Buy BABA?
Source: CNBC
- Market Pullback Reasons: On Tuesday, the Nasdaq fell 1.5% and the S&P 500 dropped about 0.6%, primarily due to rising oil prices and inflation concerns, leading to a cautious investor sentiment that negatively impacted AI-related stocks.
- Oil Price Fluctuations: U.S. WTI crude prices peaked above $102 per barrel on Tuesday, settling at $98.07, with uncertainties in the oil market exacerbating investor worries, particularly in the context of the Iran peace deal.
- Rising Rate Expectations: According to the CME FedWatch tool, the market's probability of a rate hike by year-end increased from 24% to 36%, causing unease among investors regarding future monetary policy shifts, especially impacting high P/E stocks.
- AI Stock Corrections: Following a rapid surge in AI-related stocks, the market is experiencing profit-taking, and while we believe the AI trade is not over, some profit-taking may persist in the near term, affecting data center-related stocks like Corning, GE Vernova, and Broadcom.
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Analyst Views on BABA
Wall Street analysts forecast BABA stock price to rise
15 Analyst Rating
15 Buy
0 Hold
0 Sell
Strong Buy
Current: 137.300
Low
180.00
Averages
203.09
High
230.00
Current: 137.300
Low
180.00
Averages
203.09
High
230.00
About BABA
Alibaba Group Holding Ltd is an investment holding company mainly engaged in the provision of technology infrastructure and marketing platforms. The Company operates its business through four segments. The Alibaba China E-commerce Group segment is mainly engaged in E-commerce business, including operating Tmall Supermarket and Tmall Global, providing customer management services, product sales, as well as logistics services. It also operates quick commerce business such as Taobao Instant Commerce and Ele.me, as well as the China commerce wholesale business through 1688.com. The Alibaba International Digital Commerce Group segment is mainly engaged in international commerce retail and wholesale business, operating platforms such as AliExpress, Trendyol, Lazada and Alibaba.com. The Cloud Intelligence Group segment mainly provides public and non-public cloud services. The Other segments primarily include the operations of Freshippo, Cainiao, Alibaba Health and other business.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Market Pullback as AI Stocks Face Pressure
- Market Pullback Reasons: On Tuesday, the Nasdaq fell 1.5% and the S&P 500 dropped about 0.6%, primarily due to rising oil prices and inflation concerns, leading to a cautious investor sentiment that negatively impacted AI-related stocks.
- Oil Price Fluctuations: U.S. WTI crude prices peaked above $102 per barrel on Tuesday, settling at $98.07, with uncertainties in the oil market exacerbating investor worries, particularly in the context of the Iran peace deal.
- Rising Rate Expectations: According to the CME FedWatch tool, the market's probability of a rate hike by year-end increased from 24% to 36%, causing unease among investors regarding future monetary policy shifts, especially impacting high P/E stocks.
- AI Stock Corrections: Following a rapid surge in AI-related stocks, the market is experiencing profit-taking, and while we believe the AI trade is not over, some profit-taking may persist in the near term, affecting data center-related stocks like Corning, GE Vernova, and Broadcom.
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Alibaba Set to Release Quarterly Earnings Amid AI Investment Focus
- Earnings Expectations Decline: Alibaba is projected to report an EPS of $0.84 for the quarter, reflecting a 51.4% drop, while revenue is expected to rise 11.6% to $36.36 billion, indicating pressure on profitability that may affect investor confidence.
- Strong Cloud Performance: The company's cloud business achieved a 36% growth in Q3, surpassing expectations due to increasing adoption of AI-related products, suggesting that strategic investments in cloud computing are yielding results despite overall profit challenges.
- Divergent Market Reactions: While Wall Street analysts generally rate Alibaba as a
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Citi Reiterates Buy Rating on Alibaba Amid AI Growth
- AI Revenue Growth Forecast: Citi analyst Alicia Yap projects Alibaba's AI-related revenues to grow at a 90% CAGR from FY26-31E, reaching 70% of total cloud revenues by FY2031, significantly enhancing the company's competitive edge in the tech sector.
- Cloud Revenue Target Upgrade: Yap has raised her cloud revenue estimates for 2028 and 2029, expecting a 39% CAGR from 2026 to 2031, with projected revenues hitting Rmb833.4 billion by 2031, further solidifying Alibaba's leadership in the cloud computing market.
- Value Unlocking Opportunities: The analyst reiterated a $205 price target, noting potential “significant value-unlocking opportunities” ahead, indicating a positive market sentiment towards Alibaba's growth potential that may attract more investor interest.
- Industry Leadership Position: Yap emphasized Alibaba's advantageous position in the rapidly growing token economy, reaffirming its status as the top pick for China AI investments, showcasing the company's strong capabilities in technological innovation and market adaptability.
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Alibaba Stock Declines Despite Citi's 'China's Google' Cloud Unit Label
- Stock Price Decline: Despite Citi labeling Alibaba's cloud division as 'China's Google,' the stock has slipped, indicating traders are de-risking ahead of the May 13 earnings report, which could negatively impact short-term market performance.
- AI Growth Potential: The 1:1 CPU-to-GPU ratio in Alibaba's cloud computing is seen as a key driver for AI growth, with this configuration expected to enhance computational efficiency and accelerate AI application development, thereby strengthening the company's competitive position.
- Market Expectation Adjustment: Investors are adopting a cautious stance regarding Alibaba's future performance ahead of the earnings release, likely due to uncertainties in the overall economic environment and concerns about the return on investment in the cloud computing sector, leading to downward pressure on the stock price.
- Intensifying Industry Competition: As Alibaba's cloud business rapidly evolves, competition in the AI and cloud services sectors is intensifying, which may affect the company's market share and profitability, prompting investors to reassess their investment strategies.
See More
Retail Traders Show Renewed Optimism in Tech Stocks
- Surge in Retail Trading: According to Cboe's report, retail traders are buying calls on the 'Mag 10' stocks at the highest rate since 2021, with 52% of new positions being call purchases, indicating strong investor confidence in a market rebound.
- Market Sentiment Reversal: The current call-buying metric has risen 15 points from a month ago, suggesting that investors have shifted focus from geopolitical concerns and oil prices to actively participating in the market rally.
- Options Prices Soar: The price of call contracts on the Nasdaq-100 index has reached a 52-week high, nearing a three-year record, reflecting strong demand for tech stocks and bullish investor sentiment.
- Increased Single-Stock Volatility: As traders focus more on single stocks, the ratio of Cboe's S&P 500 Constituent Volatility Index to VIX has widened to the 98th percentile, indicating a significant rise in attention towards individual stocks in the market.
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SpaceX IPO Set to Make History with Potential $2 Trillion Valuation
- Market Performance: SpaceX's stock closed at $634.05 on Forge Global, reflecting a 215% increase over the past year and valuing the company at $1.51 trillion, indicating strong market demand.
- Funding Goals: The IPO is projected to target a valuation between $1.75 trillion and $2 trillion, aiming to raise $75 billion, which would make it one of the largest IPOs in history, surpassing Saudi Aramco's $29.4 billion.
- Historical Lessons: Despite SpaceX's leadership in AI and the space economy, historical data shows that many high-valuation IPOs perform poorly post-listing, with an average decline of about 10% over six months, urging caution among investors.
- Sales Data: SpaceX reported sales between $15 billion and $16 billion last year, yet its projected price-to-sales ratio is expected to exceed 30, suggesting potential bubble risks, which may lead retail investors chasing the IPO to face disappointment.
See More
Market Pullback as AI Stocks Face Pressure
- Market Pullback Reasons: On Tuesday, the Nasdaq fell 1.5% and the S&P 500 dropped about 0.6%, primarily due to rising oil prices and inflation concerns, leading to a cautious investor sentiment that negatively impacted AI-related stocks.
- Oil Price Fluctuations: U.S. WTI crude prices peaked above $102 per barrel on Tuesday, settling at $98.07, with uncertainties in the oil market exacerbating investor worries, particularly in the context of the Iran peace deal.
- Rising Rate Expectations: According to the CME FedWatch tool, the market's probability of a rate hike by year-end increased from 24% to 36%, causing unease among investors regarding future monetary policy shifts, especially impacting high P/E stocks.
- AI Stock Corrections: Following a rapid surge in AI-related stocks, the market is experiencing profit-taking, and while we believe the AI trade is not over, some profit-taking may persist in the near term, affecting data center-related stocks like Corning, GE Vernova, and Broadcom.
See More
Alibaba Set to Release Quarterly Earnings Amid AI Investment Focus
- Earnings Expectations Decline: Alibaba is projected to report an EPS of $0.84 for the quarter, reflecting a 51.4% drop, while revenue is expected to rise 11.6% to $36.36 billion, indicating pressure on profitability that may affect investor confidence.
- Strong Cloud Performance: The company's cloud business achieved a 36% growth in Q3, surpassing expectations due to increasing adoption of AI-related products, suggesting that strategic investments in cloud computing are yielding results despite overall profit challenges.
- Divergent Market Reactions: While Wall Street analysts generally rate Alibaba as a
See More
Citi Reiterates Buy Rating on Alibaba Amid AI Growth
- AI Revenue Growth Forecast: Citi analyst Alicia Yap projects Alibaba's AI-related revenues to grow at a 90% CAGR from FY26-31E, reaching 70% of total cloud revenues by FY2031, significantly enhancing the company's competitive edge in the tech sector.
- Cloud Revenue Target Upgrade: Yap has raised her cloud revenue estimates for 2028 and 2029, expecting a 39% CAGR from 2026 to 2031, with projected revenues hitting Rmb833.4 billion by 2031, further solidifying Alibaba's leadership in the cloud computing market.
- Value Unlocking Opportunities: The analyst reiterated a $205 price target, noting potential “significant value-unlocking opportunities” ahead, indicating a positive market sentiment towards Alibaba's growth potential that may attract more investor interest.
- Industry Leadership Position: Yap emphasized Alibaba's advantageous position in the rapidly growing token economy, reaffirming its status as the top pick for China AI investments, showcasing the company's strong capabilities in technological innovation and market adaptability.
See More
Alibaba Stock Declines Despite Citi's 'China's Google' Cloud Unit Label
- Stock Price Decline: Despite Citi labeling Alibaba's cloud division as 'China's Google,' the stock has slipped, indicating traders are de-risking ahead of the May 13 earnings report, which could negatively impact short-term market performance.
- AI Growth Potential: The 1:1 CPU-to-GPU ratio in Alibaba's cloud computing is seen as a key driver for AI growth, with this configuration expected to enhance computational efficiency and accelerate AI application development, thereby strengthening the company's competitive position.
- Market Expectation Adjustment: Investors are adopting a cautious stance regarding Alibaba's future performance ahead of the earnings release, likely due to uncertainties in the overall economic environment and concerns about the return on investment in the cloud computing sector, leading to downward pressure on the stock price.
- Intensifying Industry Competition: As Alibaba's cloud business rapidly evolves, competition in the AI and cloud services sectors is intensifying, which may affect the company's market share and profitability, prompting investors to reassess their investment strategies.
See More
Retail Traders Show Renewed Optimism in Tech Stocks
- Surge in Retail Trading: According to Cboe's report, retail traders are buying calls on the 'Mag 10' stocks at the highest rate since 2021, with 52% of new positions being call purchases, indicating strong investor confidence in a market rebound.
- Market Sentiment Reversal: The current call-buying metric has risen 15 points from a month ago, suggesting that investors have shifted focus from geopolitical concerns and oil prices to actively participating in the market rally.
- Options Prices Soar: The price of call contracts on the Nasdaq-100 index has reached a 52-week high, nearing a three-year record, reflecting strong demand for tech stocks and bullish investor sentiment.
- Increased Single-Stock Volatility: As traders focus more on single stocks, the ratio of Cboe's S&P 500 Constituent Volatility Index to VIX has widened to the 98th percentile, indicating a significant rise in attention towards individual stocks in the market.
See More
SpaceX IPO Set to Make History with Potential $2 Trillion Valuation
- Market Performance: SpaceX's stock closed at $634.05 on Forge Global, reflecting a 215% increase over the past year and valuing the company at $1.51 trillion, indicating strong market demand.
- Funding Goals: The IPO is projected to target a valuation between $1.75 trillion and $2 trillion, aiming to raise $75 billion, which would make it one of the largest IPOs in history, surpassing Saudi Aramco's $29.4 billion.
- Historical Lessons: Despite SpaceX's leadership in AI and the space economy, historical data shows that many high-valuation IPOs perform poorly post-listing, with an average decline of about 10% over six months, urging caution among investors.
- Sales Data: SpaceX reported sales between $15 billion and $16 billion last year, yet its projected price-to-sales ratio is expected to exceed 30, suggesting potential bubble risks, which may lead retail investors chasing the IPO to face disappointment.
See More
