Do you own any Alibaba?
No? Me neither. Not anymore. Xi Jinping ruined it for me.
There was a time not so long ago when big Chinese tech — Alibaba, Tencent, Meituan, JD and so on — was regarded by some investors as an opportunity on par with that on offer among America’s mighty mega-caps.
That seems absurd now and not just because Nvidia changed the world. As the figure below reminds you, Chinese tech’s troubles pre-date the Nvidia-led AI revolution by more than two years.
The chart has annotations for some of the major milestones in Xi’s tech crackdown which began as an anti-monopoly push before morphing into a social engineering project under the banner of “common prosperity.”
It all began with Jack Ma’s ill-advised decision to critique financial regulators on the eve of what would’ve been the largest IPO in world history: A dual listing for Ma’s Ant Group.
Xi squashed that Ant with a sledgehammer on November 3, 2020, when Beijing abruptly canceled the IPO and, shortly thereafter, Ma himself, who disappeared from public view.
What unfolded over the next year was a deliberate effort to torpedo the market cap of China’s tech champions in the name of curbing what Xi called the “disorderly expansion of capital.” As the chart reminds you, big Chinese tech, considered as a group, fell nearly 75%. It never recovered.
That set China back years, and perhaps even decades, in the tech war with the US. It’s entirely reasonable to suggest that if Xi had just let Ma and his peers alone to go about their business, the face of the US-China tech competition would be entirely different today.
Ma survived the crackdown (thank God) and so did Alibaba. Eventually, Ma reconciled with Xi. Sort of. They shook hands earlier this year at a “symposium” Xi convened for tech leaders in and around the DeepSeek frenzy.
With all of that in mind, Alibaba’s Hong Kong-listed shares on Monday scored their best session in years on the heels of an earnings release which found the company celebrating a 26% increase in Cloud revenue assisted by AI.
Eddie Wu, whose two-year anniversary as CEO is this month, described AI-related sales as “a significant portion of revenue from external customers,” and said the company’s “committed to investing in AI + Cloud to capture historic opportunities and drive long-term growth.” AI product revenue, he went on, notched an eighth straight quarter of triple-digit growth.
Reporting late last week suggested Alibaba’s in the process of building its own AI chips. That news, tipped initially by The Wall Street Journal, boosted the shares in US trading and it was undoubtedly part of Monday’s surge in Hong Kong. “Alibaba was long one of the biggest customers of Nvidia,” the Journal remarked. “Now it and other chip designers are filling the void left after Nvidia ran into regulatory barriers to selling its products in China.”
Again, it’s fair to ask if Alibaba and other big-name Chinese tech firms would’ve been much further along in the AI race were it not for Xi’s heavy-handed intervention which torpedoed the entire sector.
The Alibaba rally on Monday was a godsend for investors in Chinese tech, which is struggling with a crippling price war. JD and Meituan — to name the two highest-profile examples — are beset by a race to the bottom that’s producing “significant losses,” as Meituan put it late last month.
Alibaba’s shares are up 122% from their October 2022 lows. Context is in order. Even after doubling and then some, they remain down 55% from their record highs. Such are the perils of state intervention by an autocrat with designs on social engineering.
The US’s competitive advantage has been squandered by Trump, witness the love fest in China between Xi, Putin and Modi. Trump has successfully pushed the 3 autocrats and most populated countries to unite against the west and Trump’s attempt to reorganize world trade. In the meantime our boy genius is attacking the rest of his team with threats and tariffs. The free world can’t take much more of this winning. Forget rate cuts, when do multinational companies start to feel the pain this genius strategy is bound to deliver.
Alibaba chip still in the testing phase and will be used specifically for inferencing and not training, so they will still be buying Nvidia chips for awhile.
Xi Jinping ruined it for me too…but plenty of good alternatives. However, things get a lot tougher when considering how Trump is similarly ruining the US of A…
A 73% haircut in the market cap of the MAG7 is a $15 trillion threat that I don’t think President Beak Wetter will be able to resist exploiting/leveraging (see recent corporate flagellation fest trying to stave off the plunder). And don’t forget, Xi remains one of very few people (along with MBS and Putin) that our Idiot A-Mean actually respects. And he’s already got plenty of hotel lobbies in which to take CEOs hostage, and plenty of hotel windows for accidental defenestrations.
Long before H ever mentioned autocracy (I think, and I say that knowing he was early to the autocrat threat), he warned about individual personal wealth, and how a growing population of individuals, led by Elon Musk, were reaching “escape velocity” where they would become Masters of the Universe, no longer really subject to American or other manmade laws and constraints. Well, that certainly seems to have played out to the point where Musk could throw $300 million at the last election and plausibly argue he was “the decider.”
But $300 million to Musk is the equivalent of about $1,000 for the average American, assuming my sources and math are correct. I’ve personally written exactly ONE political campaign donation of $1,000, and none higher. I can’t imagine making that donation and then walking out my door and demanding that “everyone listen to me.” But that might be the only thing rich people really want beyond more money — listen to me, even if my fake tan, botox, plastic surgery, difficulty with the English language and grammar, economic principles, finance principles, ethical principles, dislike of rape, sexual assault and sex trafficking