Key Takeaways
- Alibaba fell 7% after a report that the U.S. is finalizing a rule to stop Chinese companies from using advanced AI chips abroad.
- Alibaba is reportedly the biggest customer of Megaspeed, a Singapore chip buyer under U.S. investigation, which puts some of its cloud capacity at risk.
- Nvidia’s turmoil hit the companies that sell its computing power, too.
- Alibaba trades near its five-year average forward P/E, and its Nov. 19 report is the next test.
Alibaba Group (BABA) sank 7% after The Information reported that the Commerce Department is preparing to finalize a rule barring Chinese AI companies from using advanced chips in data centers outside China.
The rule hits Chinese buyers of Nvidia’s computing power.
The offshore route is closing
The rule could be announced this month and would extend U.S. chip controls to seven more countries, including Malaysia, Singapore and Thailand, according to the report. Alibaba is more exposed than most: the Financial Times reported that it’s the biggest customer of Megaspeed, a Singapore chip buyer under U.S. investigation (Alibaba isn’t the target of the probe).
And cloud is Alibaba’s growth engine, with AI Cloud and Compute revenue up 45% in the June quarter, while management says its own T-Head chips still trail foreign rivals.
Nvidia’s customers had a rough morning too
Reports that Nvidia’s board was weighing ousting CEO Jensen Huang hit the companies that sell its computing power: Nebius Group (NBIS) fell 17%, and CleanSpark (CLSK) dropped 2% with no news of its own. Nebius’s own report didn’t help. Its third-quarter revenue of $980.8 million beat estimates, but it now sees 2026 revenue at the low end of its $3 billion to $3.4 billion range. It also raised this year’s capex to $27 billion and set 2027’s at $40 billion to $45 billion, well above FactSet’s $28.77 billion. That’s a lot more spending for a little less growth.
CoreWeave (CRWV) fell 8% and Super Micro Computer (SMCI) dropped 8%. Both gave back part of Wednesday’s rally on CoreWeave’s results.
TIKR tracks 41 analysts on Alibaba. How many say “Buy”?
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Nov. 19 has to show the cloud is still growing
Analysts expect a sharp recovery in earnings:
That’s normalized EPS up about 65% in the year to March 2027, which needs cloud to keep its pace. I’d expect estimates to drift lower if the rule lands as reported.
And the stock wasn’t priced for perfection going in:
Before today, Alibaba traded at 13x forward earnings, right at its five-year average and about half its January peak. Today’s drop takes it to about 12x.
That’s not expensive, but I’d wait for Nov. 19, management’s first chance to say how much of its cloud runs on chips it rents abroad. The rule isn’t final, though: Commerce is still consulting other agencies.
So what is Alibaba stock actually worth?
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