Alibaba Shares Plunge Amid Escalating Trade Tensions

Chinese e-commerce leader Alibaba is experiencing a severe market downturn as trade disputes between the United States and China intensify. The company’s stock has recorded losses for six consecutive trading sessions, culminating in a dramatic single-day decline exceeding 8% on Friday. This sell-off has pushed the share price to its lowest point since mid-September, briefly falling below the $159 threshold.

Trade War Fears Trigger Market Sell-Off

The immediate catalyst for the downturn was a series of aggressive trade threats from former US President Donald Trump. Using social media, he warned of imposing “massive tariff increases on Chinese goods” and promised additional retaliatory measures. This rhetoric emerged in response to China’s potential restrictions on exports of rare earth minerals, which are crucial for various technology products.

Global markets reacted sharply to the escalating tensions. The Nasdaq index dropped more than 2.2%, while Chinese equities broadly faced significant selling pressure. Alibaba’s decline was particularly notable as it breached several key technical support levels that investors had been monitoring.

Should investors sell immediately? Or is it worth buying Alibaba?

Institutional Investors Show Caution

Market sentiment toward Chinese assets appears to be shifting among institutional investors. Commerzbank notably reduced its position in Alibaba on Saturday, signaling growing caution from major financial institutions. Technical indicators had previously flashed warning signs, with the Relative Strength Index (RSI) reaching 79 points on Thursday, indicating the stock was trading in overbought territory.

AI Ambitions Confront Political Reality

Despite promising developments in Alibaba’s artificial intelligence division, including a recent partnership with NBA China to develop basketball-focused AI products, the company’s fundamental strengths are being overshadowed by political headwinds. Earlier this year, CEO Eddie Wu had announced ambitious plans to invest $53 billion in AI infrastructure, highlighting the company’s commitment to technological innovation.

The current trade conflict now threatens to undermine Alibaba’s impressive 2025 rally, during which the company’s shares gained approximately 86% between July and October. Market analysts currently identify the next significant support level at $123, suggesting potential for additional declines of over 10% from current valuation levels.