Navigating Legal Headwinds and AI Ambitions: The Alibaba Investment Thesis

Alibaba Group finds itself at a critical juncture, where significant operational momentum in its core growth sectors is being tested by renewed legal scrutiny from abroad. The investment narrative for the Chinese e-commerce and cloud giant is currently shaped by two opposing forces: a fresh U.S. securities fraud investigation and the potential to secure a major technological advantage through access to next-generation AI chips.

A pivotal development emerged on December 10, 2025, when Reuters reported that Alibaba has expressed interest in Nvidia's new H200 AI chips. This opportunity stems from a policy shift by U.S. President Trump, which would permit such exports to China subject to a 25% surcharge. For Alibaba's cloud and artificial intelligence ambitions, this is a strategic imperative. Industry analyses indicate the H200 offers approximately six times the performance of the downgraded Nvidia H20 chip currently available in the Chinese market. Securing this hardware is viewed as essential for training competitive large-scale AI models and maintaining global relevance.

However, final approval rests not only with U.S. export policy but also with Chinese regulators. Reports indicate authorities in Beijing are holding urgent consultations to assess the impact on domestic semiconductor firms like Huawei and Cambricon before green-lighting any H200 imports. The timing and outcome of this domestic review remain uncertain.

Operational Strength Amidst External Pressure

Despite external challenges, Alibaba's business engine, particularly its cloud division, demonstrates robust health. The company's Cloud Intelligence Group reported a 34% year-over-year revenue increase for the September quarter of 2025, reaching 39.82 billion Renminbi (approximately $5.6 billion). Revenue from AI-related applications has now grown at a triple-digit percentage rate for nine consecutive quarters.

This operational vigor underscores why advanced computing power is so crucial. In a report dated December 11, 2025, S&P Global Ratings projected that Alibaba could expand its AI chip investments by $1 to $2 billion or more in the coming year if H200 capacity becomes available. The agency concurrently affirmed Alibaba's A+ credit rating with a stable outlook, citing a substantial net cash position of around 200 billion Renminbi.

Legal Overhang from U.S. Investigations

Counterbalancing the technological opportunity is a new layer of legal risk. On December 13, the U.S. law firm Pomerantz LLP announced an investigation into potential securities fraud claims related to Alibaba. The probe will examine whether the company and certain of its officers or directors engaged in unlawful business practices.

Should investors sell immediately? Or is it worth buying Alibaba?

This investigation was triggered by a significant share price decline on November 14, 2025. On that date, Alibaba's NYSE-listed ADRs fell sharply following a Financial Times report concerning an alleged White House memorandum that suggested the company provided technological support to the Chinese military.

For Alibaba, such class-action investigations following volatile trading are familiar terrain. The company recently agreed to a $433.5 million settlement in a separate U.S. securities case. That matter involved allegations of misrepresentations concerning monopolistic practices and the planned Ant Group IPO. A New York court gave preliminary approval to that settlement in October 2024, marking it as one of the larger securities class-action deals in that district.

Market Performance and Technical Context

Alibaba's shares, trading around €130.80, reflect the current tug-of-war. While the price sits well below its 52-week high, it remains notably above its low and has advanced nearly 58% since the start of the year. A Relative Strength Index (RSI) reading just below 30 suggests the stock is in short-term oversold territory. From a chart perspective, the equity maintains support above its 200-day moving average despite a recent pullback from peak levels.

Key upcoming milestones that will influence direction include:
* February 19, 2026: Quarterly earnings release for the December 2025 quarter.
* Ongoing: Developments in the Pomerantz investigation and any further legal proceedings.
* Pending: The final decision from Chinese authorities on the import of Nvidia H200 chips.

Strategic Outlook and Balancing Act

Alibaba embodies the complex position of major Chinese technology firms. Management has committed approximately $53 billion to AI infrastructure investment, signaling that this figure could rise further with sustained high demand. This growth trajectory, however, is set against a backdrop of recurring U.S.-China tensions and regulatory crosscurrents.

The investment case in the coming months will hinge on the interplay of three critical threads: the resolution of high-performance chip access, the continued operational dynamism in cloud and AI services, and the evolution of legal challenges in the United States. The central question for investors is whether the company's substantial investments can translate into sustainable profit growth without being eroded by legal and geopolitical risk premiums.