Alibaba Group Holding Limited's (NYSE:BABA) impressive run came under pressure on May 19 as it emerged that authorities in the US are scrutinizing a potential strategic partnership with Apple. The Chinese tech giant shed as much as 4.8% in market value as White House and Congressional officials ramped up scrutiny of a deal that would make Alibaba's AI features available on iPhones tailored for Chinese consumers.Alibaba Shares Slide as AI Deal with Apple Faces US Scrutiny

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The scrutiny in the US adds to a wave of headwinds that have paused Alibaba's explosive run in the first quarter of the year. The stock rallied by more than 40% in the first quarter but has come under pressure on disappointing quarterly results, with revenues missing estimates. The stock sentiments have since taken a hit amid reports that incorporating the Chinese tech giant's AI features in iPhones is facing some opposition.

Similarly, Apple could face some damage should authorities block the incorporation of Alibaba AI features in its devices. The US tech giant has been trying to revive its iPhone sales growth rates in China in recent years amid stiff competition from local manufacturers. In the first quarter ended March iPhone sales in China were down by 2.3% amid stiff competition from Xiaomi and Huawei.

Incorporating Alibaba AI features was a crucial development that would have strengthened the iPhone's competitive edge in the Chinese smartphone market. Consequently, Vey-Sern Ling, managing director at Union Bancaire Privee, insists Apple has more to lose than Alibaba if authorities block the proposed partnership.

While we acknowledge the potential of Alibaba Group Holding Limited's (NYSE:BABA) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than BABA and that has 100x upside potential, check out our report about the cheapest AI stock.

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