Alibaba stock took a hit on Friday following a series of negative assessments by analysts, which resulted in the company losing its position as the most valuable Chinese e-commerce company to Pinduoduo and Temu.

Prior to the market opening on Friday, shares in Alibaba dropped 1.5% after Morgan Stanley downgraded the stock from Buy to Hold. This move adds to a growing trend on Wall Street, with at least six analysts reducing their price targets for Alibaba in the past week, according to FactSet.

Alibaba has been facing regulatory challenges from U.S. export controls on chips, which have greatly impacted its artificial intelligence business. As a result, the company has decided not to spin off its cloud computing and AI division—an important part of its restructuring plan aimed at unlocking value for shareholders and a significant factor in the bull case for the stock.

While Alibaba has been focusing on efficiency amidst China's economic slowdown, Pinduoduo has been stealing the spotlight. The owner of Pinduoduo and U.S. platform Temu has experienced remarkable growth as customers flock to its more affordable products. In the past five days, PDD's shares have rallied over 25%, pushing the company's market capitalization to over $195 billion, surpassing Alibaba's market cap of $190 billion.

This shift in rankings is significant and was accompanied by Jack Ma, Alibaba's co-founder, praising Pinduoduo in an internal message this week.

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