Alibaba Shares Sink 7% as Capex Surge Outpaces Cloud Growth

Alibaba shares dropped 7% following its latest quarterly results, as a 75% increase in capital expenditure drew a harsher market reaction than the underlying business growth seemed to justify. The company's cloud division grew revenue 45%, a figure that would typically please investors, but the spending required to sustain that growth raised questions about near-term free cash flow. The sell-off matters because it tests how much runway investors will give Chinese tech companies to spend heavily on AI infrastructure before demanding returns. Baidu, by contrast, ticked up on the same day, suggesting the market is now discriminating between AI spending stories rather than rewarding capex increases uniformly. What remains unresolved is whether Alibaba's cloud growth accelerates enough in coming quarters to justify the spending pace, or whether the capex-to-revenue gap widens further.