Alibaba Stock: AI Investment Boosts Analyst Optimism

Alibaba Group is experiencing a significant stock market rally following Bernstein analysts' upgrade from "Market-Perform" to "Outperform." This positive reassessment stems primarily from growing confidence in AI-driven growth at Alicloud and improved capital allocation strategies. Consequently, analysts substantially raised price targets for Alibaba's US-listed shares from $104 to $165, while Hong Kong-listed shares saw targets increase from HK$102 to HK$161. The stock has gained considerable momentum since China's "DeepSeek moment," with investors increasingly recognizing Alicloud's value in sum-of-the-parts calculations. Despite potential temporary peaks in AI enthusiasm, experts project stronger earnings performance for Alibaba due to more disciplined capital allocation approaches and a robust AI-influenced market structure.

Strategic Pivot to AI Infrastructure

A key component driving the optimistic outlook is Alibaba's shifted investment strategy, now focusing intensively on AI infrastructure development rather than aggressive global e-commerce competition. Bernstein estimates Alicloud must increase revenue by 25-30% in fiscal year 2025/26 to offset depreciation costs from quarterly capital expenditures exceeding 30 billion RMB. This target appears achievable as AI services typically deliver higher margins than traditional cloud computing. The company recently unveiled its new AI thinking model "Deep Thinking (QwQ)," further demonstrating its artificial intelligence capabilities. Analysts predict Alicloud will emerge as a major player in China's AI infrastructure race alongside Huawei and Tencent.

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Source StockWorld