Alibaba faces existential doubts amid struggles and uncertainty
In front of the New York Stock Exchange in November of 2015, the facade of the stock exchange was covered by signage for Alibaba Group Holding Ltd., signaling the company’s global presence. However, in the last 12 months, Alibaba has experienced significant turmoil, leading to doubts about the future of the tech giant just as artificial intelligence takes off.
The company’s cloud computing unit was aiming to capitalize on the growth of AI for investors through a public listing, until it pulled those plans in November. This retreat came as Alibaba’s U.S. market value dropped below that of e-commerce rival Pinduoduo, marking struggles in an industry that had once propelled Alibaba to new heights with the world’s largest IPO in 2014.
Aside from financial setbacks, the company also faced political challenges. Alibaba was fined $2.8 billion for alleged monopolistic behavior as a result of China’s crackdown on internet tech companies in 2021, adding to the company’s woes in a slowing economic environment.
The struggles led to significant shifts in Alibaba’s management, and its stock plummeted to below $77 a share, a stark decline from its value of over $300 in 2020. According to Duncan Clark, chairman of Beijing-based investment advisor BDA, “The core to me is their eroding market position, what they are doing in terms of video, livestream and how they respond to Douyin, plus how they manage all these disparate groups and all the management turmoil. It’s a mess basically.”
Chinese consumers turned to Pinduoduo for bargains, while the popularity of Douyin, the domestic Chinese version of ByteDance’s TikTok, as a platform for livestream sales, further challenged Alibaba’s market position.
Amid these disruptions, Alibaba faced questions about its ability to adapt and compete in the marketplace. The rise of competitors like Huawei in the cloud business presented additional challenges for Alibaba, which has historically been an industry leader in this space. Chinese business news site 36kr reported that Huawei won over government clients that had previously considered deals with Alibaba.
Further complicating matters, the global IPO market has slumped, posing challenges for Alibaba’s plans to list its Cainiao logistics business and Freshippo grocery store chain. In addition to these difficulties, an international investment firm valued Alibaba’s cloud unit at less than $25 billion, significantly lower than the $40 billion the company had hoped for.
The uncertainty hanging over Alibaba, once a trailblazer in the tech industry, has raised questions about its future. While the company retains significant potential, with its impressive customer base and data, it now faces a critical moment of reevaluation and reinvention to address its internal struggles and adapt to an evolving market. As one former executive puts it, “Alibaba is getting its house in order to prepare for the next big thing.”