Your framing is accurate. Both-To The Moon - Tiger Brokers Online Investing Community - To The Moon

Your framing is accurate. Both Alibaba Group and Tencent are entering a capex-heavy AI phase, and the market is struggling to price the transition.

---

1) Can Alibaba Cloud price hikes offset margin pressure?

Short answer: partially, but not immediately.

Why price increases help:

37% cloud growth suggests AI-driven demand is real, not just cyclical

Enterprise AI workloads (training + inference) are less price-sensitive

Higher-value services (AI, data, security) → structurally better margins

But the constraint:

AI infra (GPUs, data centres) is front-loaded capex

Depreciation + energy costs hit before revenue fully scales

China cloud competition (Huawei, state players) caps aggressive pricing

👉 Net effect:

Price hikes can slow margin erosion, but unlikely to “fix” next-quarter profits.

---

2) What the market is really debating

This is not about one quarter. It is about business model transition:

Phase Old Alibaba New Alibaba

Core Asset-light e-commerce Capital-heavy AI + cloud

Margins High, stable Lower, volatile (for now)

Capital use Buybacks Capex + AI investment

Tencent is facing the same pivot, hence the cautious stance from banks.

---

3) Value trap vs “darkness before dawn”

❌ Value trap case

Cloud becomes low-margin utility (like telecom)

AI spending escalates into an arms race with weak ROI

Buybacks shrink → valuation support disappears

✅ “Before the dawn” case (more compelling)

Cloud + AI becomes second growth engine

Monetisation shifts from compute → AI services + ecosystem lock-in

Operating leverage kicks in after scale (similar to AWS 2016–2019 phase)

---

4) My read (aligned with your investing style)

This is not a classic value trap yet.

It is:

> A margin compression cycle driven by deliberate reinvestment

Key signal to watch:

If cloud growth stays >25–30% while margins stabilise → bullish inflection

If growth slows but capex remains high → then it becomes a trap

---

Bottom line

Next 1–2 quarters: margins likely remain under pressure

12–24 months: outcome depends on whether Alibaba Cloud achieves AI-driven pricing power + scale

👉 I would treat this as:

Accumulation zone (gradual), not aggressive buying

Similar to early AI infra plays, but with China-specific risks

Alibaba & Tencent Miss: Can AI Serve as New Growth Engine?

Alibaba is currently engaged in an unprecedented "cash-for-growth" strategy. Nevertheless, the silver lining remains in the cloud: Alibaba Cloud’s revenue growth surged to 37%. Goldman Sachs and Macquarie noted that Tencent is shifting into a capital-intensive "catch-up phase," and cut price target to $700 amid margin pressure. This move is expected to dilute short-term profits and potentially scale back the size of share buybacks. Can Alibaba Cloud’s price increases stem the "bleeding" of profit margins in the next quarter? Is this a value trap, or simply the darkness before the dawn?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

1

{"i18n":{"language":"en_US"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":544382843552480,"tweetId":"544382843552480","gmtCreate":1773933665709,"gmtModify":1773933681870,"author":{"id":4176423247955812,"idStr":"4176423247955812","authorId":4176423247955812,"authorIdStr":"4176423247955812","name":"Lanceljx","avatar":"https://community-static.tradeup.com/news/09909b81957df6057776741ed24e12fe","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":11,"crmLevelSwitch":0,"currentWearingBadge":{"badgeId":"a83d7582f45846ffbccbce770ce65d84-1","templateUuid":"a83d7582f45846ffbccbce770ce65d84","name":"Real Trader","description":"Completed a transaction","bigImgUrl":"https://static.tigerbbs.com/2e08a1cc2087a1de93402c2c290fa65b","smallImgUrl":"https://static.tigerbbs.com/4504a6397ce1137932d56e5f4ce27166","grayImgUrl":"https://static.tigerbbs.com/4b22c79415b4cd6e3d8ebc4a0fa32604","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2025.09.17","individualDisplayEnabled":0},"individualDisplayBadges":[{"badgeId":"9427a906234c4b18a82ec3d7730b7fa8-1","templateUuid":"9427a906234c4b18a82ec3d7730b7fa8","name":"Star Contributor","description":"Published at least 3 PICK posts (or 10 IDEA posts) and, within the past 30 days, posted at least 1 PICK post (or 4 IDEA posts) and 1 comment","bigImgUrl":"https://community-static.tradeup.com/news/1866dcf97a73be1c330f85862546aedc","smallImgUrl":"https://community-static.tradeup.com/news/4f5c5fa8e2c7683bb5a7fce8753ee456","redirectLinkEnabled":1,"redirectLink":"https://ttm.financial/activity/market/2023/star-contributors/","hasAllocated":1,"isWearing":0,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2026.03.19","individualDisplayEnabled":1,"backgroundColor":{"dark":"#675a37","tint":"#f9ebc2"},"fontColor":{"dark":"#ffffff","tint":"#ab7a0e"}}],"fanSize":535,"starInvestorFlag":false},"themes":[{"themeId":"895fb1e1297846998649daa3a2941004","categoryId":"7a15628ce2174325bddc6229505e0d70","name":"Alibaba & Tencent Miss: Can AI Serve as New Growth Engine?","type":0,"rnLink":"https://laohu8.com/RN?name=RNTheme&page=/theme/detail&rndata={\"themeId\":895fb1e1297846998649daa3a2941004}&rnconfig={\"headerBarHidden\": true}","description":"Alibaba is currently engaged in an unprecedented \"cash-for-growth\" strategy. Nevertheless, the silver lining remains in the cloud: Alibaba Cloud’s revenue growth surged to 37%.\nGoldman Sachs and Macquarie noted that Tencent is shifting into a capital-intensive \"catch-up phase,\" and cut price target to $700 amid margin pressure. This move is expected to dilute short-term profits and potentially scale back the size of share buybacks.\nCan Alibaba Cloud’s price increases stem the \"bleeding\" of profit margins in the next quarter? \nIs this a value trap, or simply the darkness before the dawn?","image":"https://community-static.tradeup.com/news/a38bd8e797243d3f11d3f2e07cd2a038"}],"images":[],"coverImages":[],"title":"","html":"<html><head></head><body><p>Your framing is accurate. Both Alibaba Group and Tencent are entering a capex-heavy AI phase, and the market is struggling to price the transition.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>1) Can Alibaba Cloud price hikes offset margin pressure?</p>\n<p><br></p>\n<p>Short answer: partially, but not immediately.</p>\n<p><br></p>\n<p>Why price increases help:</p>\n<p><br></p>\n<p>37% cloud growth suggests AI-driven demand is real, not just cyclical</p>\n<p><br></p>\n<p>Enterprise AI workloads (training + inference) are less price-sensitive</p>\n<p><br></p>\n<p>Higher-value services (AI, data, security) → structurally better margins</p>\n<p><br></p>\n<p><br></p>\n<p>But the constraint:</p>\n<p><br></p>\n<p>AI infra (GPUs, data centres) is front-loaded capex</p>\n<p><br></p>\n<p>Depreciation + energy costs hit before revenue fully scales</p>\n<p><br></p>\n<p>China cloud competition (Huawei, state players) caps aggressive pricing</p>\n<p><br></p>\n<p><br></p>\n<p>👉 Net effect:</p>\n<p>Price hikes can slow margin erosion, but unlikely to “fix” next-quarter profits.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>2) What the market is really debating</p>\n<p><br></p>\n<p>This is not about one quarter. It is about business model transition:</p>\n<p><br></p>\n<p>Phase Old Alibaba New Alibaba</p>\n<p><br></p>\n<p>Core Asset-light e-commerce Capital-heavy AI + cloud</p>\n<p>Margins High, stable Lower, volatile (for now)</p>\n<p>Capital use Buybacks Capex + AI investment</p>\n<p><br></p>\n<p><br></p>\n<p>Tencent is facing the same pivot, hence the cautious stance from banks.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>3) Value trap vs “darkness before dawn”</p>\n<p><br></p>\n<p>❌ Value trap case</p>\n<p><br></p>\n<p>Cloud becomes low-margin utility (like telecom)</p>\n<p><br></p>\n<p>AI spending escalates into an arms race with weak ROI</p>\n<p><br></p>\n<p>Buybacks shrink → valuation support disappears</p>\n<p><br></p>\n<p><br></p>\n<p>✅ “Before the dawn” case (more compelling)</p>\n<p><br></p>\n<p>Cloud + AI becomes second growth engine</p>\n<p><br></p>\n<p>Monetisation shifts from compute → AI services + ecosystem lock-in</p>\n<p><br></p>\n<p>Operating leverage kicks in after scale (similar to AWS 2016–2019 phase)</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>4) My read (aligned with your investing style)</p>\n<p><br></p>\n<p>This is not a classic value trap yet.</p>\n<p><br></p>\n<p>It is:</p>\n<p><br></p>\n<p>&gt; A margin compression cycle driven by deliberate reinvestment</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>Key signal to watch:</p>\n<p><br></p>\n<p>If cloud growth stays &gt;25–30% while margins stabilise → bullish inflection</p>\n<p><br></p>\n<p>If growth slows but capex remains high → then it becomes a trap</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>Bottom line</p>\n<p><br></p>\n<p>Next 1–2 quarters: margins likely remain under pressure</p>\n<p><br></p>\n<p>12–24 months: outcome depends on whether Alibaba Cloud achieves AI-driven pricing power + scale</p>\n<p><br></p>\n<p><br></p>\n<p>👉 I would treat this as:</p>\n<p><br></p>\n<p>Accumulation zone (gradual), not aggressive buying</p>\n<p><br></p>\n<p>Similar to early AI infra plays, but with China-specific risks</p></body></html>","htmlText":"<html><head></head><body><p>Your framing is accurate. Both Alibaba Group and Tencent are entering a capex-heavy AI phase, and the market is struggling to price the transition.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>1) Can Alibaba Cloud price hikes offset margin pressure?</p>\n<p><br></p>\n<p>Short answer: partially, but not immediately.</p>\n<p><br></p>\n<p>Why price increases help:</p>\n<p><br></p>\n<p>37% cloud growth suggests AI-driven demand is real, not just cyclical</p>\n<p><br></p>\n<p>Enterprise AI workloads (training + inference) are less price-sensitive</p>\n<p><br></p>\n<p>Higher-value services (AI, data, security) → structurally better margins</p>\n<p><br></p>\n<p><br></p>\n<p>But the constraint:</p>\n<p><br></p>\n<p>AI infra (GPUs, data centres) is front-loaded capex</p>\n<p><br></p>\n<p>Depreciation + energy costs hit before revenue fully scales</p>\n<p><br></p>\n<p>China cloud competition (Huawei, state players) caps aggressive pricing</p>\n<p><br></p>\n<p><br></p>\n<p>👉 Net effect:</p>\n<p>Price hikes can slow margin erosion, but unlikely to “fix” next-quarter profits.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>2) What the market is really debating</p>\n<p><br></p>\n<p>This is not about one quarter. It is about business model transition:</p>\n<p><br></p>\n<p>Phase Old Alibaba New Alibaba</p>\n<p><br></p>\n<p>Core Asset-light e-commerce Capital-heavy AI + cloud</p>\n<p>Margins High, stable Lower, volatile (for now)</p>\n<p>Capital use Buybacks Capex + AI investment</p>\n<p><br></p>\n<p><br></p>\n<p>Tencent is facing the same pivot, hence the cautious stance from banks.</p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>3) Value trap vs “darkness before dawn”</p>\n<p><br></p>\n<p>❌ Value trap case</p>\n<p><br></p>\n<p>Cloud becomes low-margin utility (like telecom)</p>\n<p><br></p>\n<p>AI spending escalates into an arms race with weak ROI</p>\n<p><br></p>\n<p>Buybacks shrink → valuation support disappears</p>\n<p><br></p>\n<p><br></p>\n<p>✅ “Before the dawn” case (more compelling)</p>\n<p><br></p>\n<p>Cloud + AI becomes second growth engine</p>\n<p><br></p>\n<p>Monetisation shifts from compute → AI services + ecosystem lock-in</p>\n<p><br></p>\n<p>Operating leverage kicks in after scale (similar to AWS 2016–2019 phase)</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>4) My read (aligned with your investing style)</p>\n<p><br></p>\n<p>This is not a classic value trap yet.</p>\n<p><br></p>\n<p>It is:</p>\n<p><br></p>\n<p>&gt; A margin compression cycle driven by deliberate reinvestment</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>Key signal to watch:</p>\n<p><br></p>\n<p>If cloud growth stays &gt;25–30% while margins stabilise → bullish inflection</p>\n<p><br></p>\n<p>If growth slows but capex remains high → then it becomes a trap</p>\n<p><br></p>\n<p><br></p>\n<p><br></p>\n<p>---</p>\n<p><br></p>\n<p>Bottom line</p>\n<p><br></p>\n<p>Next 1–2 quarters: margins likely remain under pressure</p>\n<p><br></p>\n<p>12–24 months: outcome depends on whether Alibaba Cloud achieves AI-driven pricing power + scale</p>\n<p><br></p>\n<p><br></p>\n<p>👉 I would treat this as:</p>\n<p><br></p>\n<p>Accumulation zone (gradual), not aggressive buying</p>\n<p><br></p>\n<p>Similar to early AI infra plays, but with China-specific risks</p></body></html>","text":"Your framing is accurate. Both Alibaba Group and Tencent are entering a capex-heavy AI phase, and the market is struggling to price the transition. --- 1) Can Alibaba Cloud price hikes offset margin pressure? Short answer: partially, but not immediately. Why price increases help: 37% cloud growth suggests AI-driven demand is real, not just cyclical Enterprise AI workloads (training + inference) are less price-sensitive Higher-value services (AI, data, security) → structurally better margins But the constraint: AI infra (GPUs, data centres) is front-loaded capex Depreciation + energy costs hit before revenue fully scales China cloud competition (Huawei, state players) caps aggressive pricing 👉 Net effect: Price hikes can slow margin erosion, but unlikely to “fix” next-quarter profits. --- 2) What the market is really debating This is not about one quarter. It is about business model transition: Phase Old Alibaba New Alibaba Core Asset-light e-commerce Capital-heavy AI + cloud Margins High, stable Lower, volatile (for now) Capital use Buybacks Capex + AI investment Tencent is facing the same pivot, hence the cautious stance from banks. --- 3) Value trap vs “darkness before dawn” ❌ Value trap case Cloud becomes low-margin utility (like telecom) AI spending escalates into an arms race with weak ROI Buybacks shrink → valuation support disappears ✅ “Before the dawn” case (more compelling) Cloud + AI becomes second growth engine Monetisation shifts from compute → AI services + ecosystem lock-in Operating leverage kicks in after scale (similar to AWS 2016–2019 phase) --- 4) My read (aligned with your investing style) This is not a classic value trap yet. It is: > A margin compression cycle driven by deliberate reinvestment Key signal to watch: If cloud growth stays >25–30% while margins stabilise → bullish inflection If growth slows but capex remains high → then it becomes a trap --- Bottom line Next 1–2 quarters: margins likely remain under pressure 12–24 months: outcome depends on whether Alibaba Cloud achieves AI-driven pricing power + scale 👉 I would treat this as: Accumulation zone (gradual), not aggressive buying Similar to early AI infra plays, but with China-specific risks","highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/544382843552480","repostId":0,"isVote":1,"tweetType":1,"viewCount":59,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":1867,"optionInvolvedFlag":false,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/544382843552480"}