Its Hong Kong-listed shares plunged 28% from a March high through Thursday, nearly double the loss in a gauge of Chinese tech peers. Rivals JD.com Inc. and Meituan have dropped by similar measures amid daily headlines on government efforts to contain the destructive hyper-competition being dubbed “involution”.

At least four brokers, including Goldman Sachs Group Inc. and HSBC Holdings Plc, have cut their price targets by an average of 8% since late June as the latest phase of the yearslong turf war continues to escalate.

“It could last longer than expected,” said Luo Jing, investment director at Value Partners Group Ltd. in Hong Kong. “The players are financially stronger than in the previous round, with more cash and better cash flow positions.”

Alibaba’s food-delivery strategy has distracted investors away from the DeepSeek-led AI boom that drove its shares up more than 80% in just two months earlier this year. The company has merged its delivery unit into its core business and boosted subsidies since JD.com’s formal entry to the space in February.

It’s a costly fight. Nomura Holdings Inc. estimates about $4 billion has been burned on discounts in the June quarter alone by Alibaba, Meituan and JD.com. It sees Alibaba dictating the intensity and scale of the coupon war going forward.

Sector leader Meituan said Saturday that it was going into “attack” mode versus Alibaba, while JD.com announced a new incentive scheme this week. The companies’ extreme moves have drawn much criticism from the government over the potential disastrous impact to the industry, as well as warnings on driver health and food safety.

Alibaba might sustain a loss of 41 billion yuan ($5.7 billion) in its food-delivery business for the 12 months through next June, according to Goldman Sachs, equal to about a third of its net income for the fiscal year ended March.

“Aggressive investment in food delivery, insta-shopping will meaningfully damp its near-term earnings outlook,” HSBC analysts including Charlene Liu wrote in a note this week, cutting their price target for Alibaba by 15%.

The consensus estimate for Alibaba’s 12-month forward earnings per share is down about 6% since early May. Analysts are still overwhelmingly bullish, with 44 buy ratings on the Hong Kong shares and no holds or sells. The stock also remains historically cheap at a price-to-earnings ratio of less than 11 times.

In terms of uspide risks, UOB Kay Hian Holdings Ltd. analyst Julia Pan notes that the government may step in to curb price competition if the market takes a heavy blow and margins get squeezed further. Alibaba’s current valuation is low enough to trigger some dip buying, she added.

The stock climbed as much as 3.5% Friday amid a broad rally in Hong Kong.

But investors may remain cautious until a definitive end to the steep discounts, especially if they trigger more earnings downgrades and constrain investment in all-important AI business. 

“We do need to watch for price competition that evolves into a situation where certain companies decide to gain market share at the expense of profitability,” said Nicholas Chui, a Franklin Templeton portfolio manager. “As a stock picker, we would avoid those stocks.”