Here’s why Alibaba, Tencent, Xiaomi stocks are falling amid the AI boom

The biggest Chinese technology companies are underperforming the market despite the ongoing artificial intelligence boom. Xiaomi stock has plunged by 30% this year, while Tencent and Alibaba have dropped by 27% and 13%, respectively. 

They have suffered steeper declines from their highest points last year. Xiaomi, which is widely seen as China’s answer to Apple, has tumbled by 55% from its highest point last year and is at its lowest point since December 2024. In contrast, Apple (NASDAQ: AAPL) has soared by 56% in the last 12 months, with its market capitalization hitting $4.60 trillion.

Alibaba, China’s equivalent to Amazon (NASDAQ: AMZN), is down 34% from its year-to-date high. Amazon, on the other hand, has soared by 33% in the last 12 months, with its market cap nearing $3 trillion. 

Notably, the Hang Seng Tech Index, which is Hong Kong’s equivalent to the Nasdaq 100 Index, has dropped by over 26% from its highest point last year. The Nasdaq 100 Index is up by over 14% this year. 

Tencent’s revenue came short of estimates

The most recent financial results showed that Tencent’s revenue jumped by 9% in the first quarter. While this was a record quarter, it missed what analysts were expecting. 

Its revenue came in at 196.5 billion yuan ($28.9 billion), lower than the median estimate of 199 billion yuan. Notably, its domestic gaming unit made 45.4 billion yuan, up by 6% You. This division grew by 24% in the same period last year. 

The company’s business continued to benefit from the AI business, with its business services revenue rising by 20% YoY. Its WorkBuddy service has become the most popular agentic service in China.

Alibaba stock retreated as profit plunged

Meanwhile, the Alibaba stock price has crashed into a bear market as concerns about its profits rose. The most recent numbers revealed that its earnings before interest, taxes, and amortization (EBITDA) dropped to 5.1 billion yuan ($750 million), a 84% YoY plunge.

This retreat came as the company continued to invest in its technology and its e-commerce businesses. Also, the management expects to spend more on its AI projects than what it had guided. It now expects to spend over 380 billion yuan in the next five years.

READ MORE: Alibaba stock could jump 40%: new AI chip gives bulls fresh momentum

Xiaomi stock hit by rising memory and chip costs

Xiaomi stock price has crashed hard in the past few months as concerns about its margins remained. The company is facing a major issue as prices of key components like memory soared. 

As a result, its revenue and profits have plunged in the past few quarters. The most recent results showed that its revenue dropped by 10% in the first quarter to 99.14 billion yuan, while the profit for the period fell by 56.5% to 4.7 billion yuan.

The company also blamed the rising competition for the ongoing weakness in its business. Some of this weakness is coming from Apple, which has continued to gain market share in China. 

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