Why Alibaba Stock Plummeted by Almost 13% Last Month

Key Points
One was the U.S. government, which was apparently mulling limits on exports of cutting-edge AI chips.
Another was the company's own performance, as third-quarter results missed analyst estimates.
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Massive Chinese tech company Alibaba (NYSE: BABA) was looking rather diminished on the U.S. stock market in March. Investors weren't cheered by a report that the U.S. government might impose limits on crucial artificial intelligence (AI) technology to Chinese companies, nor were they satisfied with Alibaba's latest earnings report. Over the month, the company's stock fell by nearly 13%.
Not a great beginning
That tumble started early in March. On the month's first trading day, Bloomberg published a report stating that the Trump administration was considering limits on exports of AI accelerator chips to China.
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Citing unidentified "people familiar with the matter," the business news agency wrote that federal government officials were considering a combined export limit of 75,000 next-generation Nvidia H200 and Advanced Micro Devices MI325 chips for each Chinese company.
This would clearly and directly affect the sprawling Alibaba, which has poured considerable resources into developing its Qwen AI models and shows no signs of retreating from that technology.
The tech giant's stock took another blow toward the end of March, when it took the wraps off its fiscal third quarter of 2026 results.
For the period, Alibaba's revenue was just under 285 billion yuan ($41.4 billion), up 2% year over year. Net income not under generally accepted accounting principles (GAAP) fell much more steeply, tumbling by 67% to 16.7 billion yuan ($2.4 billion), shaking out to 7.09 yuan ($1.03) per each of the company's American Depositary Shares (ADSes).
Those figures didn't compare favorably to the average analyst estimates. Alibaba missed both the consensus top-line projection of 289.7 billion yuan ($42.1 billion) and, especially, the collective 10.94 yuan ($1.59) per ADS forecast.
Much of the profitability decline can be chalked up to Alibaba's aggressive push into the "quick commerce" retail segment, which is stuffed with ambitious competitors on the domestic market. That, combined with heavy spending on AI infrastructure and other factors, pushed the bottom line well below the ever-important consensus prognosticator estimate.
A company on the move
There has been a lot of smoke and noise about tariffs and limits on next-generation hardware, but the current U.S. presidential administration has frequently wavered on such matters. I wouldn't buy or sell Alibaba on that basis.
With this company, more depends on its leaning into fast e-commerce and its commitment to AI. For investors who believe these segments are highly promising and that the company can dominate at least one of them, its equity is a solid investment. Those of a more skeptical disposition might be better off buying other tech titles.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.