Alibaba's stock has fallen the most in two months. What's weighing on it?

Shares of Chinese e-commerce giant Alibaba posted their sharpest decline in the past two months in Hong Kong after a Chinese regulator held a meeting with representatives of online marketplaces and demanded stricter product quality standards, according to Seeking Alpha.

Alibaba shares plummeted 6.1% in Hong Kong on Thursday, October 22, marking their worst performance since August 24, according to Bloomberg. They continued to decline during U.S. trading. The Hong Kong Hang Seng Tech Index (HSTECH) also closed down 5%, marking its steepest decline since April 2025. The broader Hang Seng Index also ended the day in the red, losing 3 percent—with Alibaba shares contributing the most to this decline, notes Seeking Alpha.

Investors are skeptical that hyperscalers’ massive spending on artificial intelligence will yield sufficient returns, Bloomberg notes. Against this backdrop, the Hang Seng Tech Index has lost 31% since the start of the year and is close to erasing all the gains made following Beijing’s massive stimulus package in September 2024, the agency reports.

Alibaba’s stock came under pressure following a special meeting recently held in Beijing by the State Administration for Market Regulation (SAMR) of the People’s Republic of China. The meeting focused on improving the quality of goods and services on the platforms of Alibaba, JD.com, and other companies—including PDD Holdings, Xiaohongshu, Kuaishou, ByteDance, and Vipshop.

SAMR stated that platforms should act as “gatekeepers.” Among the ongoing risks, the agency cited counterfeit goods, products that do not match their descriptions, and false advertising, noting that these issues are particularly prevalent in live-stream sales and instant retail—the delivery of goods in a matter of minutes, according to the Ask Traders portal, citing the Chinese publication Jiemian News.

However, the regulator did not announce any immediate measures or fines. According to Ask Traders, this is not a crackdown on the industry or an investigation, but merely a reminder that the platforms are under the regulator’s close scrutiny.

“Such ‘reminders’ about quality are nothing new for the sector, but there’s no end in sight. They are having less and less impact on financial results and are affecting investor sentiment more,” said Stephen Leung, executive director at brokerage firm UOB Kay Hian, as quoted by Bloomberg.

Alibaba’s stock decline on Thursday highlights the regulatory and business challenges facing China’s e-commerce sector, Bloomberg notes. Companies need to maintain growth in their core businesses while simultaneously increasing spending on artificial intelligence and other cutting-edge technologies that are a priority for Beijing. Investor caution is also being fueled by rising oil prices amid escalating tensions in the Middle East and the expiration of a 90-day grace period, during which wealthy families could pay taxes on offshore trusts without penalties.

“It appears that the sell-off in the Chinese e-commerce sector, particularly in Alibaba shares, is part of a broader trend toward risk reduction,” says Gerald Gan, chief investment officer at Reed Capital Partners. These concerns are similar to those facing U.S. stocks in the artificial intelligence sector: investors are increasingly questioning the scale of investment in AI and whether current valuations are justified, he added.

Mainland Chinese investors have been selling Hong Kong stocks for the seventh consecutive trading session—the longest selling streak since July, according to data compiled by Bloomberg.

The decline in the Hang Seng Tech Index was the result of an “indiscriminate sell-off,” according to Hao Hong, chief investment officer at the hedge fund Lotus Asset Management. “The Hang Seng Tech Index should reach its technical bottom today or, more likely, tomorrow,” Bloomberg quotes Hong as saying. “These are disorderly sell-offs. It appears that some algorithmic funds are liquidating their positions. The sell-off is not related to fundamentals, as the latest macroeconomic data is strong,” he added.

This article was AI-translated and verified by a human editor