Key Takeaways
- Alibaba captured 41% of CIO preferences for AI deployment in Morgan Stanley’s latest China survey, rising from 32% previously
- The company’s Qwen platform dominates across cloud infrastructure, AI models, and enterprise applications; ByteDance’s Doubao trails at 27%
- DeepSeek saw its projected market share tumble from 33% to 18% among enterprise technology leaders
- Morgan Stanley maintains its “Top Pick” designation for Alibaba with Overweight rating and $180 target
- China’s overall IT budget expansion forecast plunged to a survey-low 4.8%, sliding from 12.6% previously
Alibaba (BABA) hovers near $131.50, experiencing modest daily weakness, yet the company’s strategic positioning appears increasingly robust following Morgan Stanley’s latest research highlighting its dominance in China’s artificial intelligence sector.
Alibaba Group Holding Limited, BABA
The financial institution’s AlphaWise 1H26 China CIO Survey, gathering insights from 60 chief information officers during March and April, revealed Alibaba extending its competitive advantage. CIO selection of Alibaba for AI implementation jumped to 41%, advancing from the 32% recorded in the previous assessment.
Thirty percent of surveyed technology executives anticipate Alibaba will command the largest portion of incremental AI expenditures in 2026, securing the top position. ByteDance’s Doubao platform ranked second with 27% support.
DeepSeek, which demonstrated significant traction in the earlier survey, experienced a dramatic decline in projected market penetration—plummeting from 33% to 18%. Morgan Stanley researchers explained this reversal by pointing to Qwen’s regular platform enhancements and ByteDance’s vigorous promotional efforts, which stand in contrast to DeepSeek’s more reserved, research-oriented strategy.
Morgan Stanley analyst Gary Yu maintained his Overweight stance on BABA while reaffirming his $180 valuation target. The broader investment community shares this optimism—the stock commands a Strong Buy consensus comprising 15 Buy recommendations and two Hold ratings accumulated over the past quarter. The mean price objective stands at $185.41, suggesting approximately 45.6% appreciation potential from present trading levels.
Cloud Division Powering Forward Momentum
Morgan Stanley forecasts Alibaba’s cloud segment will expand by more than 40% on a year-over-year basis, propelled by escalating AI requirements and expanded platform adoption. Recent pricing adjustments across cloud offerings—featuring a 5% to 34% elevation on T-Head AI processors and roughly 30% increases in cloud storage fees—have failed to dampen customer demand.
AI-related expenditures as a percentage of IT allocations are expected to nearly double, climbing from 6.1% in 2025 to 12.1% in 2026. This represents a substantial reallocation, and Alibaba seems strategically positioned to monetize this transition.
However, challenges exist. Elevated investment in AI offerings such as Qwen has inflated operational expenses, creating near-term earnings headwinds. Reduced losses in the company’s quick commerce division are anticipated to contract, potentially mitigating some of this financial pressure over time.
Challenging Environment for China’s Technology Sector
The survey revealed concerning trends for China’s broader technology marketplace. CIOs reduced their 2026 IT budget expansion projections to 4.8%—establishing a new low since Morgan Stanley initiated this survey in 2020 and representing a steep decline from the 12.6% previously reported.
Geopolitical friction, deflationary pressures, and rapid AI evolution are collectively driving conservative planning among technology executives. Approximately 47% indicated that most AI initiative rollouts have been postponed to 2027.
One notable development: AI investments are beginning to cannibalize traditional software allocations. The proportion of AI funding sourced from existing software budgets expanded to 22%, up from 10% in the earlier survey. Software’s total contribution to AI spending contracted from 46–47% to 40%, while hardware’s allocation increased.
Regarding public cloud infrastructure, adoption rates are projected to accelerate over the coming three years, with Alibaba preserving its leadership position while ByteDance and Huawei capture incremental market share.
