Alibaba stock slides as AI theft claims, Pentagon lawsuit pile on

Alibaba ↘ 2.94% shares plunged on Friday in Hong Kong, falling over 6% to around HK$89, as a pair of damaging headlines — accusations of AI model theft by Anthropic and a lawsuit against the U.S. Department of Defense — eroded investor confidence in the Chinese tech giant.

Dual Crises Converge

The sell-off came after Anthropic accused Alibaba of conducting "the largest known distillation attack" on its Claude AI model, according to a letter sent to U.S. Senators Tim Scott and Elizabeth Warren dated June 10 and reported by CNBC and The Wall Street Journal this week. Anthropic alleged that individuals linked to Alibaba and its AI lab conducted 28.8 million interactions with Claude through approximately 25,000 fraudulent accounts between April 22 and June 5, 2026, in what the company called a "brazen" and "unlawful" campaign to extract its model's capabilities.bbc+2

Separately, Alibaba filed a lawsuit against the U.S. Department of Defense on Tuesday in a California federal court, seeking removal from the Pentagon's list of "Chinese Military Companies," according to the Associated Press. The designation blocks listed firms from obtaining U.S. defense contracts and carries broader reputational consequences. An Alibaba spokesperson denied any connection to the Chinese military, calling the Pentagon's decision "arbitrary and capricious".apnews+1

Analyst Downgrades and Consumer Weakness

Nomura cut its price target on Alibaba's U.S.-listed shares from $207 to $178 while maintaining a buy rating, according to MarketBeat. The downgrade reflected deteriorating fundamentals, with Barron's noting that Alibaba's adjusted earnings slumped 56% in fiscal 2026 amid heavy AI spending and e-commerce price wars.barrons+1

Adding to the gloom, China's 618 shopping festival — one of the country's largest online retail events — delivered underwhelming results. Total sales grew just 4% year-over-year during the event, which ran from May 13 to June 18, a sharp deceleration from the 15.2% growth recorded in 2025, according to CNBC citing data from retail analytics firm Syntun. Reuters reported the festival highlighted weak consumer demand, with China's retail sales falling 0.6% in May — the first contraction since December 2022.cnbc+1

Steep Decline From Peak

The stock has now fallen roughly 50% from its October 2025 peak, with the Hang Seng-listed shares trading near levels not seen since early 2025. As of Friday's session, MarketWatch showed shares at HK$89.10, down 6.2% from the previous close. The prolonged slide reflects what Seeking Alpha described as a seven-session losing streak earlier in June that had already pushed the stock more than 24% lower on the year.seekingalpha+1

Alibaba has denied the Anthropic allegations. As the company fights battles on multiple fronts — geopolitical, legal, and competitive — analysts remain divided on whether the stock's steep discount represents opportunity or a value trap.