Key Highlights
- Morgan Stanley’s latest China CIO Survey positions Alibaba as China’s dominant AI player, with 41% of CIOs choosing it for AI implementationâa jump from 32% previously
- Alibaba’s Qwen model demonstrates leadership across cloud infrastructure, AI models, and enterprise applications; ByteDance’s Doubao trails at 27%
- DeepSeek’s projected market share fell dramatically from 33% to 18% among surveyed technology leaders
- Morgan Stanley maintains Alibaba as a “Top Pick” with Overweight rating and $180 price target
- China’s IT budget growth expectations reached a survey record low of 4.8%, declining from 12.6% in the previous period
Alibaba (BABA) is currently hovering near $131.50, experiencing modest daily declines, yet the company’s long-term prospects appear increasingly promising following Morgan Stanley’s latest survey identifying it as China’s foremost AI powerhouse.
Alibaba Group Holding Limited, BABA
The investment bank’s AlphaWise 1H26 China CIO Survey, compiled from responses of 60 chief information officers during March and April, reveals Alibaba establishing significant separation from competitors. The proportion of CIOs selecting Alibaba for AI deployment reached 41%, marking a substantial increase from the 32% recorded in the previous survey period.
Thirty percent of surveyed CIOs anticipate Alibaba will command the largest portion of new AI expenditures throughout 2026, securing the top position. ByteDance’s Doubao platform secured second place with 27% of responses.
DeepSeek, which demonstrated impressive traction in the earlier survey, experienced a steep decline in projected market shareâplummeting from 33% to 18%. Morgan Stanley researchers explained this reversal by pointing to Qwen’s regular model enhancements and ByteDance’s vigorous marketing campaigns, which stand in stark contrast to DeepSeek’s more subdued, research-oriented strategy.
Morgan Stanley analyst Gary Yu reaffirmed his Overweight rating on BABA while maintaining his $180 price target. The broader Street shares this optimismâthe stock holds a Strong Buy consensus rating based on 15 Buy recommendations and two Hold ratings issued over the last three months. The consensus price target stands at $185.41, suggesting approximately 45.6% potential upside from current trading levels.
Cloud Division Powers Forward
Morgan Stanley projects Alibaba’s cloud segment will expand by more than 40% year-over-year, fueled by accelerating AI adoption and increased platform utilization. Recent pricing adjustments across cloud offeringsâincluding 5% to 34% increases for T-Head AI chips and approximately 30% higher cloud storage feesâhave not dampened customer demand.
AI expenditures as a percentage of overall IT budgets are forecast to nearly double, climbing from 6.1% in 2025 to 12.1% in 2026. This represents a substantial transformation, and Alibaba seems strategically positioned to capitalize on this wave.
However, there’s a complication. Elevated investment in AI offerings like Qwen has increased operational expenses, creating headwinds for near-term profitability. The company’s quick commerce division is expected to see narrowing losses, which may help mitigate some of this pressure moving forward.
Challenging Environment for China’s IT Sector
The survey revealed concerning trends for China’s overall IT landscape. CIOs reduced their 2026 IT budget growth projections to 4.8%âestablishing a record low since Morgan Stanley initiated this survey in 2020 and representing a dramatic drop from the previous 12.6% forecast.
Geopolitical uncertainties, deflationary pressures, and the rapid evolution of AI technology are contributing to widespread CIO hesitation. Nearly half of respondentsâ47%âindicated that most AI project rollouts have been postponed until 2027.
One notable development: AI initiatives are beginning to cannibalize traditional software budgets. The proportion of AI funding sourced from existing software allocations increased to 22%, up from 10% in the prior survey. Software’s overall contribution to AI spending contracted from 46â47% to 40%, while hardware’s share expanded.
Regarding public cloud infrastructure, adoption rates are anticipated to accelerate throughout the next three years, with Alibaba maintaining its market leadership position while ByteDance and Huawei capture additional market share.
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