Key Takeaways
- Alibaba secured first place in Morgan Stanley’s China CIO Survey as the preferred AI provider, with 41% of respondents choosing it for AI implementation—a jump from 32%
- The company’s Qwen model dominates in cloud infrastructure, models, and applications; ByteDance’s Doubao trails at 27%
- DeepSeek experienced a significant decline in projected market share, falling from 33% to 18% among survey participants
- Morgan Stanley maintains its “Top Pick” designation for Alibaba with an Overweight rating and $180 target price
- China’s overall IT budget growth forecast plummeted to a record low of 4.8%, compared to 12.6% in the previous survey
Alibaba (BABA) is currently trading near $131.50, experiencing modest daily losses, yet the company’s long-term prospects appear considerably more promising following Morgan Stanley’s latest survey positioning it as China’s premier AI provider.
Alibaba Group Holding Limited, BABA
The financial institution’s AlphaWise 1H26 China CIO Survey, conducted among 60 chief information officers during March and April, revealed Alibaba establishing significant distance from competitors. The percentage of CIOs selecting Alibaba as their AI deployment partner surged to 41%, representing substantial growth from the previous survey’s 32%.
Thirty percent of surveyed CIOs anticipate Alibaba will secure the largest portion of fresh AI expenditures in 2026, positioning it at the forefront. ByteDance’s Doubao platform ranked second with 27% support.
DeepSeek, despite demonstrating robust momentum in earlier surveys, experienced a dramatic decline in expected market penetration—plummeting from 33% to 18%. Morgan Stanley researchers credited this shift to Qwen’s regular model enhancements and ByteDance’s forceful marketing initiatives, contrasted against DeepSeek’s more reserved, research-oriented strategy.
Morgan Stanley analyst Gary Yu maintained his Overweight assessment on BABA while preserving his $180 price objective. Wall Street sentiment aligns strongly—the stock commands a Strong Buy consensus based on 15 Buy recommendations and two Hold ratings recorded over the last three months. The mean price target stands at $185.41, suggesting approximately 45.6% potential appreciation from present levels.
Cloud Division Powers Forward
Morgan Stanley anticipates Alibaba’s cloud segment will expand by more than 40% year-over-year, fueled by escalating AI requirements and expanded platform adoption. Recent pricing adjustments across cloud offerings—including 5% to 34% increases on T-Head AI processors and approximately 30% elevation in cloud storage fees—have not dampened customer demand.
AI expenditure as a proportion of IT budgets is forecast to almost double, rising from 6.1% in 2025 to 12.1% in 2026. This represents a substantial transformation, and Alibaba seems ideally situated to benefit from this trend.
However, challenges exist. Elevated investment in AI offerings like Qwen has increased operational costs, creating headwinds for near-term profitability. Losses within the company’s quick commerce division are anticipated to decrease, potentially mitigating some of this financial pressure going forward.
Challenging Environment for China’s IT Sector
The survey revealed concerning trends for China’s wider IT industry. CIOs reduced their 2026 IT budget growth projections to 4.8%—an all-time low since Morgan Stanley initiated the survey in 2020 and a dramatic decline from the prior 12.6% forecast.
Geopolitical uncertainties, deflationary pressures, and rapid AI evolution are collectively driving CIO caution. Nearly half of respondents—47%—indicated that most AI project rollouts have been postponed until 2027.
One notable development: AI is beginning to cannibalize traditional software allocations. The proportion of AI investment sourced from existing software budgets increased to 22%, up from 10% in the preceding survey. Software’s total contribution to AI spending contracted from 46–47% to 40%, while hardware’s share expanded.
Regarding public cloud infrastructure, adoption is projected to intensify over the coming three years, with Alibaba maintaining its dominant position and both ByteDance and Huawei making incremental gains.
