Apple's (NASDAQ:AAPL) AI pact sends Alibaba (NYSE:BABA) shares skidding after US scrutiny, The New York Times reports.

BABA plunged as much as 4.8% in Hong Kong on Mondayleading the Hang Seng China Enterprises Index lowerafter the White House flagged Alibaba's planned deal to embed its AI on Apple's iPhones in China. That drop compounds pressure on Alibaba, whose quarterly revenue recently came in below consensus as iPhone sales in China slid 2.3% in the quarter ended March 29.

The proposed partnership, first announced by Alibaba Chairman Joseph Tsai in February, would have Alibaba's AI powering Siri-style features on iPhones sold within China's tightly regulated market.

Apple has been exploring similar tie-ups with Baidu (NASDAQ:BIDU) and even weighed deals with ByteDance, Tencent (TCEHY) and startup DeepSeekbefore ruling DeepSeek out for lack of scale. U.S. officials fear the arrangement could expose sensitive data or bolster a Chinese firm's global ambitions, potentially derailing Apple's broader AI rollout.

For Alibaba, this latest regulatory headwind comes amid a broader slowdown: revenue growth has decelerated as the company grapples with stiff competition from Xiaomi (XIACF), Huawei and a softening e-commerce environment. The stock's recent 15% drawdown from its year-to-date peak underscores investor unease around regulatory risk and execution challenges in its core markets.

Why It Matters: A stalled AI partnership with Apple could delay Alibaba's push into high-margin services, while raising fresh doubts about U.S.China tech cooperation and Alibaba's near-term growth outlook.Alibaba Tumbles as Apple AI Pact Faces Scrutiny

Analyst sentiment on Alibaba Group Holding is showing subtle strain. While the total number of ratings edged up to 44, the number of Underperform calls jumped to 7more than triple the previous months. At the same time, Buy ratings dipped to 14, their lowest in five months. This shift suggests growing caution despite a still-broad base of support.

This article first appeared on GuruFocus.

View Comments