Alibaba (NYSE:BABA) stock plunged by over 5% on Friday after the Chinese AI and e-commerce giant released its latest earnings. Its New York-listed ADR fell to $117.96, its lowest level since July 31. The retreat could extend further, with the stock now flashing a bearish chart pattern and the company facing looming dilution concerns.
Alibaba to Raise $10 Billion in Share Sale
BABA shares will be in the spotlight after the company confirmed that it will raise $10 billion to fund its AI ambitions. It is doing so by offering 710 million of its Hong Kong shares at a 3.6% discount, with UBS and China International Capital arranging the deal.
The new share offering is coming a few days after the company published its earnings report. These numbers showed that its capital expenditure jumped to $10 billion in the June quarter as CPU, server, and GPU prices jumped.
Its revenue jumped by 9% to 268.95 billion yuan ($40 billion), while its operating profit dropped by 75%. Also, it reported a negative free cash flow of 44.7 billion yuan ($6.65 billion).
Alibaba has made some major strides in the AI business, with its Qwen models downloads surging to over 3 billion. These downloads are much higher than that of other popular companies like Google and Meta Platforms. Apple (NASDAQ:AAPL) is using its models on the iPhone in China. Its most recent Qwen 3.8 model is comparable to Anthropic’s Fable.
This growth is translating to strong AI revenue, with its revenue growing by triple digits. In a statement, the Eddie Wu, the CEO, said:
"With our full‑stack AI strategy, we have put Alibaba in a superior position to capture the substantial growth of demand for artificial intelligence and AI compute."
Alibaba Stock Has Formed a Rising Wedge Pattern
The daily chart shows that the BABA stock peaked at $132 earlier this month and then retreated to $119.34. A closer look shows that it has already dropped below the 100-day Exponential Moving Average (EMA).
Most importantly, it has moved below the lower side of the ascending trendline that connects the lowest swings since June 26. This line was the lower side of the rising wedge pattern, a common bearish sign in technical analysis.
The two lines of the MACD indicator have formed a bearish crossover pattern. Therefore, the stock will likely continue falling as costs rise. If this happens, the next key target to watch will be at $100, down by 16% from the current level.
Image: Shutterstock
Login to comment