Alibaba (HK:9988) shares fell in Hong Kong trade on Thursday after Jefferies cut the Chinese e-commerce giant’s target price on headwinds from higher AI-related spending and losses in its non-core businesses.
Alibaba fell 2.9% to HK$122.70, and was among the biggest weights on the Hang Seng index, which shed 0.6%.
Jefferies cut its target price on Alibaba’s U.S. shares (NYSE:BABA) to $185.0 from $212.0, and retained its Buy rating on the stock.
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The brokerage said the lower price target factored in higher spending by Alibaba on promoting its Qwen artificial intelligence offerings, and also considered bigger expected losses in Alibaba’s non-core businesses.
While Jefferies noted that Alibaba’s recent launch of its AI text-to-video app, Happy Horse, was a success, its increased spending on AI promotions, especially during the key Lunar New Year period, was likely to crimp earnings.
Losses in Alibaba’s “All Others” segment, which covers its non-core and retail units, are also expected to have increased in the March quarter due to increased subsidies and promotional activities.
Still, Jefferies said it expects losses in quick commerce to improve in the March quarter, while fiscal 2027 losses are expected to halve from a year earlier.
Alibaba announced earlier this year it would spend 3 billion yuan ($431 million) on Lunar New Year promotions, with a bulk of these aimed at attracting users to its Qwen AI app.
