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Alibaba reshuffles cloud team to focus on AI; Time to buy?

Alibaba reshuffles cloud team to focus on AI; Time to buy?

2023 has been a very challenging year for China’s Alibaba (NYSE: BABA). The company launched ambitious restructuring programs as its shares were offering a lackluster performance on the stock market and spent the year mostly on a downward trajectory.

Alibaba’s valuation took another hit in mid-November as it decided to cancel the initial public offering (IPO) of its cloud computing and Freshippo groceries divisions. This decision, which was influenced by a combination of market conditions and strategic realignment, has had a significant impact on the company’s short-term financial prospects.

The latest efforts of the tech company are primarily focused on ensuring that the cloud computing division can adequately support the needs of artificial intelligence (AI) – a technology that has been in the spotlight throughout 2023.

Alibaba’s restructuring plans

Alibaba is reportedly bringing in industry veterans to its cloud computing division in an attempt to reinforce it after the canceled IPO. This move is seen as a strategic response to the growing AI arms race in China and the global market. The company’s three key areas of focus are cloud infrastructure, public cloud, and hybrid cloud, which are essential for powering modern AI applications.

The move comes as Alibaba is facing increased pressure from competition in China as other major firms are increasingly getting in on the AI business. It also isn’t unlikely that the reshuffling is part of a broader strategy to increase China’s internal artificial intelligence capabilities.

New export restrictions imposed by the U.S. government in late October already forced the semiconductor giant Nvidia (NASDAQ: NVDA) to cancel some deliveries of its advanced chips. At the same time, Baidu (NASDAQ: BIDU) has been proactive throughout the year and has been receiving a significant contingent of microchips from Huawei in recent months.

BABA stock price analysis

Barring a few weeks during the spring and summer, Alibaba has been on a decisive downward trajectory since early February 2023. The company’s shares received a particularly significant hit in mid-November after the cancellation of several highly-anticipated public listings, and they fell 9% in a single day.

BABA YTD price chart. Source: FInbold

While BABA stabilized somewhat in the most recent period, it has overall failed to reverse its decline, and its stock fell 0.60% – down to $78.49 – during Friday trading. This slightly downward trend is also observable in the extended-hours trading.

Despite its recent performance, it is possible that Alibaba is well-positioned to make a comeback. Should its restructuring, particularly its AI-focused reinforcements, prove effective, the company and its stock might experience a resurgence in the following years.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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