Alibaba reported a 75% drop in net income and the stock fell 5%. Traders who bought shares yesterday are now explaining to their spouses that artificial intelligence is very important for the future.
The company spent so much money on AI that profits collapsed by three-quarters in a single quarter. This is what happens when a corporation decides to light cash on fire because every other corporation is also lighting cash on fire. Stunning business strategy. Revolutionary.
Net income dropped 75%. Not revenue. Net income. The money you actually get to keep. Alibaba looked at their pile of profits and said what if we made this pile 75% smaller but added chatbots.
U.S. listed shares were volatile in premarket trading, which is finance journalism speak for the stock went down and some guy in New Jersey panic-sold at 6:47 AM in his underwear. That guy has a name. It's Derek. Derek has a wife and two kids and a Robinhood account he promised he wouldn't check before breakfast. Derek checked.
The June quarter results came out and Wall Street analysts immediately began explaining why spending yourself into oblivion is actually genius if you squint hard enough and believe in the transformative power of large language models. They used the word monetization fourteen times in a single research note.
Retail traders saw AI spending in the headline and got confused because they were told AI companies make money, not lose it. Turns out building AI costs money. Lots of it. So much that your net income can drop by 75% while analysts nod approvingly and say the word ecosystem.
Alibaba's reward for investing heavily in the future: a 5% haircut before the opening bell and a thousand bagholders googling what is net income.
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