Morgan Stanley is bullish on Alibaba’s artificial intelligence-driven growth as the company boosts its spending plans. Analyst Gary Yu upgraded shares of the Chinese e-commerce giant to overweight from equal weight and lifted his price target by $80 to $180, which suggests 25.2% upside. Alibaba’s U.S.-traded shares are up 69.5% this year and have jumped roughly 93% over the past 12 months as investors have touted the company as the top play in Chinese artificial intelligence. According to Yu, Alibaba is poised for continued leadership in the rapidly developing AI cloud market as the company’s cloud revenue is set to double in three years. Yu pointed out that Alibaba, in its fourth-quarter earnings report , committed to boost its capex investments in the next three years to a level that is set to exceed its cumulative spending over the past decade. “BABA, a the largest hyperscaler with superior technology and highly ranked open-sourced LLM (Qwen), appears poised to capture the AI cloud opportunity after stepping up capex,” the analyst said in a note to clients. “We didn’t expect the surge in AI-driven cloud demand since DeepSeek emerged in January. We now see acceleration in cloud revenue growth.” He added that he expects “a better competitive landscape for GPU (vs. CPU) infrastructure and scaling public cloud to boost EBITDA margin.” Yu raised his view on China’s internet industry to attractive, saying the country offers “superior exposure” to AI enablers and adopters. Alibaba shares popped last week on its strong earnings report, which reflected a sharp increase in its AI-related product revenue . Traders are watching the company’s Qwen AI model, which has become a rival to DeepSeek, and its partnership with Apple to roll out AI features for iPhones sold in Chinese. Yu is also optimistic that Alibaba’s core online retail business should see strong growth over the next few quarters driven by its implementation of a software service fee. “Despite weak consumption and intense competition, core TTG business appears to be more resilient than feared, supported by higher take-rates,” he said.
