Alibaba's Hong Kong-listed shares slid about 5% on early Monday trading, leading losses on the Hang Seng China Enterprises Index, after U.S. officials raised alarms over its AI partnership with Apple (NASDAQ:AAPL).

The White House is wary that the deal could accelerate China's AI prowess, expose Apple to stricter Chinese data rules and pose national security risks.

Warning! GuruFocus has detected 3 Warning Signs with BABA.

The setback compounds Alibaba's mixed Q4 fiscal 2025 results. Revenue of RMB236.4 billion ($32.6 billion) fell short of the RMB237.9 billion that analysts expected, while earnings per American Depositary Share came in at $1.73, below forecasts. Investors punished the stock, driving it down more than 8% after the earnings release.

Analysts caution that regulatory scrutiny may slow Alibaba's cloud and AI expansion. Bloomberg Intelligence's Catherine Lim warns the U.S. pushback could curb the company's potential cloud-revenue upside.

Apple, China's second-largest smartphone vendor, also stands to lose if the tie-up stalls. Its sales in the region slipped 2.3% last quarter amid fierce competition from Huawei and Xiaomi. Union Bancaire Privee's Vey-Sern Ling notes Apple needs a local AI partner to remain competitive in China's fast-evolving market.

This article first appeared on GuruFocus.

View Comments