Alibaba stock dropped sharply in Hong Kong after reports surfaced that the US government is scrutinizing a potential AI deal between Apple and Alibaba. The partnership, which aimed to bring Alibaba’s DeepSeek AI to iPhones sold in China, now faces political resistance from Washington. The fallout comes just weeks after Alibaba’s chairman declared the company’s AI would power future iPhones—a bold move that once fueled market optimism. Now, investors are pulling back, and Alibaba’s path to consumer-scale AI suddenly looks uncertain.
The AI Deal That’s Now in Limbo
What started as a quiet tech collaboration has turned into a geopolitical flashpoint. According to the New York Times, both the White House and congressional officials are now examining Apple’s plan to embed Alibaba’s AI into iPhones for the Chinese market. The concern? Data security and Beijing’s influence over AI infrastructure.
Neither side has offered clarity. Apple won’t talk. Alibaba is silent. US officials are tight-lipped. But their silence speaks volumes. The partnership, once a symbol of AI progress, now feels like a diplomatic risk. This deal wasn’t just another corporate announcement. For Alibaba, it represented the first real consumer-facing application of its DeepSeek AI models. If it had gone through, it would’ve taken Alibaba’s AI from white papers and cloud platforms to the pockets of millions. That scale is rare and hard to replace.
Investors Don’t Like Uncertainty, Especially in AI
Markets wasted no time reacting. Alibaba stock dropped nearly 5% on Monday, wiping out gains from earlier optimism around the Apple deal. The message from investors is clear: without this partnership, Alibaba’s AI story loses serious weight. In February, Chairman Joseph Tsai said iPhones would soon run Alibaba’s AI. That comment sent the stock soaring. Bulls believed Alibaba had finally found a path to scale its AI models, leapfrogging Chinese competitors and proving itself on the global stage.
Delays Hit More Than Just Headlines
This isn’t just about public relations or short-term market moves. Inside Alibaba, teams likely planned entire investment rounds, infrastructure builds, and marketing strategies around this rollout. That’s what makes this pause so damaging.
Bloomberg Intelligence analysts already expect Alibaba to delay cloud investments tied to the project. Without Apple, the company’s consumer AI ambitions shrink back into something safer, slower, and harder to monetize. And in a field moving this fast, slowing down, even briefly, can be brutal. Alibaba doesn’t lack talent or technology. Its DeepSeek AI stack remains one of China’s most advanced. But without real-world deployment, those models stay trapped in internal demos and enterprise pitches. That’s not where the future is being built.
Apple May Lose Ground, But Alibaba Stock Loses Momentum
Yes, Apple faces its own risk. Without a local AI partner, its iPhones could fall behind in China, where brands like Huawei and Xiaomi are already embedding smart features powered by homegrown models. Apple’s 2.3% sales dip in China last quarter was a warning shot. Still, Alibaba’s setback feels heavier. Apple can pivot. It has hardware dominance and options. Alibaba, on the other hand, just watched one of its few paths to scale and visibility get blocked by a foreign government.
This isn’t just a missed deal. It’s a reminder of how fragile China’s AI progress remains when global politics step in. US scrutiny isn’t just targeting code—it’s shaping who gets to lead. Until clarity returns, Alibaba stock isn’t moving forward. Its DeepSeek AI vision will stay on hold, caught between what it’s built and where it’s allowed to go.
About The Author
