Alibaba (BABA) Stock Forecast: New AI Chatbot released in China

Alibaba releases AI chatbot in English, Mandarin.
BABA stock seems to shrug shoulders on news.
Resistance rests just ahead between $103 and $105.
Alibaba's Hong Kong view news more positively than US-listed ADRs.

Clay Webster FXStreet

Alibaba (BABA) surprised the market on Tuesday when it unveiled a new rival to OpenAI's ChatGPT bot. Called Tongyi Qianwen, the large language model (LLM) bot interacts with users similar to the many other artificial intelligence (AI) based bots by scrolling the internet to derive answers to user questions.

The news sent Alibaba's Hong Kong-listed shares up more than 1.5% on Tuesday, but the US market has been less optimistic with BABA ADRs rising just 0.4% to $101.90 in Tuesday's premarket.

Alibaba stock news: Another AI chatbot emerges, this time it's "socialist"

Tongyi Qianwen can be translated to something like: truth from a thousand questions. The system thus far incorporates both English and Mandarin responses, and Alibaba said it will be integrating the LLM into Ding Talk, its product similar to Slack or Microsoft Teams for workplace communication. Additionally, the Tongyi Qianwen will be added to Tmall Genie, which is similar to Amazon's (AMZN) Alexa.

“We are at a technological watershed moment driven by generative AI and cloud computing, and businesses across all sectors have started to embrace intelligence transformation to stay ahead of the game,” said CEO Daniel Zhang.

Since OpenAI released ChatGPT late last year, a number of competitors have flooded the market. Alphabet (GOOGL) has released Bard, Microsoft (MSFT) has integrated OpenAI's GPT-4 with its Bing search engine, Tencent (TCEHY) is working on its own version called HunyuanAide, and Baidu (BIDU) released the ERNIE bot.

It appears that Chinese tech companies have more restrictions than their US counterparts however. The Cyberspace Administration of China recently released an advisory that generative AI must still adhere to "core socialist values".

The US market may be somwhat less enthusiastic since there are so many competitors to choose from. It might take the rest of the year before user figures help the market differentiate between the half dozen LLMs in circulation. Also, investors continue to digest Alibaba's plan to split into six separate companies. Current CEO Daniel Zhang is expected to lead Alibaba's cloud business, which is where Tongyi Qianwen is housed. Lastly, China's naval war games over the weekend remain on US investors' radar.

Alibaba stock forecast

The only thing worth watching with Alibaba stock this week is whether it can break above the $103 to $105.32 resistance range. This area pushed the stock down last week and was working as far back as July and August of last year. Bulls have been taking profits here for some time, so there will need to be renewed buying pressure to make it through this thicket. A close above here on the weekly chart would allow bulls to enter next week and make a run at the $120 mark.

Now that Alibaba is breaking up into separate entities, the general consensus is that the stock should garner about double its current value. However, many a trader has gotten burned by this name over the past two years, so a new community of bulls needs to be bred in order to carry out that journey.

A failure to hold above $105.32 this week will likely push another drop to support at the 21-day moving average, which is currently just underneath $91.

BABA daily chart

Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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