Jack Ma Loses His $3 Billion Gain As Investors Worry About Alibaba’s Growth Outlook

Billionaire Jack Ma is back to square one. The $3.4 billion gain to his wealth since the start of the year has all but evaporated, after Alibaba’s stock was dragged lower on renewed worries over the company’s growth prospects

The globe-trotting Ma, who stepped down from the helm of Alibaba in 2019 but continues to derive his wealth from his holdings in the e-commerce giant, is now estimated to be worth $23.6 billion. His fortune has dropped $3.1 billion since the company’s stock peaked at HK$122 apiece in January, when China’s long-awaited reopening from Covid lockdowns and regulatory approval of Ant Group’s funding plan were helping to bolster investor sentiment.

But now the optimism is fading as the pace of the recovery in Chinese consumer demand has not been as strong as expected. “Although factories have resumed production and people have gone back to work, there is still not a strong desire to buy goods such as apparel and beauty products,” says Shawn Yang, a Shenzhen-based managing director at research firm Blue Lotus Capital Advisors.

That, coupled with concerns about potential margin erosion due to a fresh price war brewing in the e-commerce sector, is weighing on sentiment. The Hong Kong-listed shares of the e-commerce company dropped 5.3% Friday, although it managed to eke out a 2% increase in revenue that rose to 247.8 billion yuan ($35.9 billion) for the December quarter despite the fact that widespread Covid-related restrictions were still in effect back then.

According to the company’s earnings release, growth was mainly bolstered by sales from its international units, which rose by 18% year-on-year. Its core China commerce business, including revenues from shopping sites Taobao and Tmall, actually slid 1%.

“Later in the year there should be a recovery in China’s e-commerce market but it doesn’t necessarily mean Alibaba will have a very strong rebound,” says Ke Yan, head of research at Singapore-based DZT Research. “Its competitors—such as Pinduoduo, Douyin and Kuaishou—are all trying to grab market share.”

Alibaba Cloud Intelligence, the once fast-growing cloud computing unit, is also losing luster. The unit’s revenue only inched up 3% to $2.9 billion, compared with a whooping 50% jump seen just two years ago.

The unit suffered an outage towards the end of last year, when services abruptly broke down and affected many users including cryptocurrency exchange OKX in Hong Kong and the Monetary Authority of Macau. Although they had since been restored, Alibaba is now trailing behind billionaire Ren Zhengfei’s Huawei in the market for cloud computing.

China’s government-related entities, such as local tax bureaus and state-owned enterprises, are keen to use more cloud services as part of their efforts to develop smart cities, but they have been partnering with Huawei instead. According to a post from the latter’s website that cites IDC data, Huawei ranked No. 1 in the cloud computing market for government services, a segment in which it held a 27% share.

Alibaba Chief Executive Daniel Zhang, who in December personally took charge of the company’s cloud computing unit, vowed to win back lost ground. During Thursday’s analyst call, he pointed to future opportunities from new technologies such as generative AI, which in theory would require more computing power and higher demand for cloud services.

“So for us, as a cloud vendor, I think that story is purely just getting started,” he said.

The company, in the meantime, has also joined China’s race to develop a local version of ChatGPT, betting that conversational chatbots will lead to new growth opportunities.

“I think that [generative AI] certainly will also be transformative and create new experiences and new formats of consumption,” Zhang said during the analyst call, while brushing aside questions about price wars and subsidy spending as “nothing new.” “We will continue to seek and drive new technology breakthroughs to open up new frontiers in commerce and in business,” he added.