To The Moon

As of March 20, 2026, both $Alibaba(BABA)$ Alibaba and $TENCENT(00700)$ Tencent have released their latest earnings (Q4 2025/FY 2025), and the market reaction has been telling. While both face headwinds in their legacy businesses—e-commerce for Alibaba and a mix of gaming/ads for Tencent—their AI trajectories are diverging into two distinct models: Infrastructure (Alibaba) vs. Ecosystem Integration (Tencent).

AI as the New Growth Engine: Fact or Friction?

For both companies, AI is no longer a "future" project; it is actively offsetting the stagnation in their core segments. However, the "miss" in expectations primarily stems from the massive costs required to fuel this engine.

• Alibaba: AI is the volume driver. Alibaba Cloud revenue grew 36% year-over-year this quarter, with AI-related product revenue posting triple-digit growth for the tenth consecutive quarter. The "miss" was on the bottom line: net profit plummeted 67% because they are sacrificing current margins to capture AI market share.

• Tencent: AI is the efficiency driver. Tencent's revenue grew 14%, slightly beating estimates, but its stock fell 6% after the call. The market was spooked by management’s "conservative" AI spending (due to GPU supply constraints) compared to rivals like ByteDance. Tencent is using AI to sharpen ad targeting and gaming engagement rather than selling raw compute at scale.

Comparing Potential: Who Benefits Most?

You can determine their relative potential by looking at where the "AI value" is being captured in their financial statements.

The Verdict: Alibaba has better potential if you believe AI is an infrastructure play (owning the stack from chips to cloud). Tencent has better potential if you believe AI's true value lies in distribution (leveraging the 1.3B+ users on WeChat).

Alibaba Cloud: Margin Engine or CAPEX Trap?

Alibaba is currently walking a tightrope between these two outcomes.

The Case for a Margin Engine: Alibaba recently hiked prices for its AI compute and cloud services by up to 34%. This signals an intentional shift away from "buying" customers with discounts toward high-margin monetization. If their in-house T-Head GPUs continue to scale, they can reduce reliance on expensive external hardware, potentially expanding margins significantly by 2027.

The Case for a CAPEX Trap: The numbers are staggering. Alibaba has pledged RMB 380 billion ($53B) over three years for AI infrastructure. This quarter, capital expenditure surged 80%, dragging free cash flow into negative territory. If enterprise adoption of AI in China remains slow or shifts toward "light" open-source models, Alibaba risks owning a massive, expensive "digital factory" with no one to buy the output.

Key Indicator to Watch: Monitor the Cloud Adjusted EBITA. This quarter, it grew 25% to RMB 3.9 billion. If this continues to grow while the Group margin shrinks, the Cloud is successfully becoming the engine. If Cloud EBITA starts to stall despite revenue growth, you are looking at a CAPEX trap.

In the next section, we would like to explore how we can position a trade by looking at the technical breakdown of both stocks.

Based on the price action following the March 18–19, 2026 earnings reports, both companies have retreated to significant technical "buy zones." While Alibaba is showing signs of being deeply oversold, Tencent is currently testing a critical multi-month support line.

Here is the technical breakdown for both tickers:

Alibaba (BABA / 9988.HK)

Alibaba took a massive hit following its Q3 FY2026 miss on March 19, opening down 8.73%.

Current Price: ~$134.43 (NYSE ADR)

Key Support Levels:

• $134.00 (Immediate): The stock is currently testing this horizontal floor. A break below this would be a significant "sell" signal, but the price has historically reversed here.

• $124.00 - $129.00 (Secondary): This matches the "Lower Expected Move" derived from March 20 options pricing.

Technical Indicators:

• RSI (14): Currently sitting at 33.74, bordering on the "Oversold" threshold (<30). On some shorter-term frames, it has already dipped below 30, suggesting the selling may be exhausted.

• MACD: Indicates a neutral-to-bearish signal (), showing that while the downward momentum is strong, the "gap-down" has already priced in much of the immediate earnings negativity.

• Moving Averages: The stock has broken through its medium-term rising trend channel. It is now looking for a "pivot bottom."

Tencent (0700.HK)

Tencent plummeted over 6.8% on March 19 after management's "conservative" AI spending commentary (the "GPU scarcity" explanation) rattled investors.

Current Price: HK$513.00

Key Support Levels:

• HK512.00: This is the "Line in the Sand." It represents a high-volume accumulation zone and a major historical support trendline.

• HK$500.00 (Psychological): If HK$510 fails, the psychological round number at $500 is the next stop.

Technical Indicators:

• MACD: Interestingly, the 3-month MACD still shows a buy signal from an earlier pivot on March 5, but the short-term 5-day and 10-day averages have turned into "sell" signals.

• Fibonacci Retracement: The S1 level sits at HK$511.48, almost perfectly aligning with the volume support at HK$512.

• Volatility: Average True Range (ATR) suggests a daily swing of ±HK512 holds.

Comparative Strategy Table

Summary of the Setup

For BABA: Watch the $134 level closely. If it holds through the end of the week, the RSI indicates a potential "oversold bounce" back toward $145.

For Tencent: The HK$512 level is the key. Since it is currently trading just above this, a "long" position here with a tight stop-loss below HK$506 offers a high-probability risk-to-reward ratio.

Summary

Following their March 2026 earnings reports, Alibaba and Tencent find themselves at a crossroads where AI has transitioned from a speculative venture into a primary, high-stakes growth engine.

The Earnings Divergence

While both companies reported top-line growth (Alibaba +9% excluding divestitures; Tencent +14%), they "missed" on investor sentiment due to the immense costs of the AI transition. Alibaba saw its net profit plummet 67% as it prioritized aggressive AI infrastructure spending. Tencent marginally beat revenue estimates but saw its stock slide after revealing plans to double AI investment in 2026, which will be funded by curtailing its massive share buyback program.

AI as the New Growth Engine

• Alibaba (The Shovel Provider): Alibaba is the infrastructure play. Its Cloud Intelligence Group revenue grew 36%, with AI-related revenue posting triple-digit growth for the tenth consecutive quarter. Alibaba is betting that owning the underlying compute—and its Qwen LLM—will make it the indispensable backbone of China’s AI economy.

• Tencent (The Ecosystem Integrator): Tencent is focusing on "Agentic AI" through its WeChat ecosystem. By launching the QClaw agent and WorkBuddy, Tencent aims to automate tasks for its 1.4 billion users. Their strategy is high-utility; they are using AI to sharpen ad targeting and gaming engagement rather than just selling raw compute.

Margin Engine vs. CAPEX Trap

The "CAPEX Trap" risk is most acute for Alibaba. The company is committed to a RMB 380 billion ($53B) spending spree over three years. While this infrastructure is necessary to compete with global hyperscalers, it has already dragged free cash flow into negative territory.

However, signs of a "Margin Engine" are emerging: Alibaba recently raised prices for its AI compute by up to 34%. If it can successfully transition from "buying market share" with discounts to leveraging its in-house T-Head AI chips, the cloud division could see significant margin expansion by 2027.

The Verdict

• Better AI Potential: Tencent currently has the "stickier" path. By integrating AI agents directly into the WeChat super-app, they face less friction in monetization.

• Better Infrastructure Potential: Alibaba remains the dominant choice for enterprise AI. If China’s broader corporate sector migrates to the cloud to run large-scale models, Alibaba’s "digital factory" will be the primary beneficiary.

Appreciate if you could share your thoughts in the comment section whether you think Tencent have a better AI potential compared to the “CAPEX Trap” risk that Alibaba might face in scaling its AI infrastructure.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.