Alibaba Stock Juggles AI Boom, Costs and Dilution Risk

Alibaba ( (BABA) ) has been popular among investors this week. Here is a recap of the key news on this stock.

Alibaba is drawing fresh attention from global investors as it reshapes itself from a pure e-commerce champion into a broader technology and cloud infrastructure player, even as near‑term risks grow. In its latest regulatory filing, the company reported a modest increase of about 10.3 million issued shares in December 2025, mainly due to the vesting of restricted share units and option exercises under its equity incentive plans. While the overall authorised share capital remains unchanged and there are no treasury shares, Alibaba also highlighted that its outstanding convertible senior notes could be turned into up to 686.56 million ordinary shares, signaling a sizable potential source of future dilution that equity holders need to watch.

Operationally, Alibaba’s cloud business continues to stand out, with revenue rising roughly 34% year-on-year on the back of surging demand for AI services. The group is investing heavily, committing more than $50 billion to cloud and AI infrastructure and pushing its open-source Qwen AI models to over 600 million downloads, surpassing Meta’s Llama in global usage. However, these aggressive investments, combined with slower growth and rising costs in the core retail segment, are weighing on margin visibility. That tension showed up in markets this week: despite better-than-expected Q2 FY26 results, Alibaba shares fell over 3% after Freedom Capital Markets cut the stock to Hold and trimmed its price target to $140, citing higher spending and lagging e-commerce growth versus peers. Still, broader Wall Street sentiment remains bullish, with a Strong Buy consensus, an average target near $205 implying mid‑30s to 40% upside, and technical indicators flashing Buy, even as AI-based analysis on TipRanks keeps the stock at Neutral due to cash flow and valuation concerns. For investors, Alibaba increasingly looks like a long-term bet on Chinese cloud and AI infrastructure, balanced against dilution risk and ongoing pressure in its traditional retail business.