Key Takeaways
- Alibaba emerged as China’s leading AI platform in Morgan Stanley’s CIO Survey, with 41% of CIOs choosing the company for AI deployment, rising from 32%
- Qwen model dominates across cloud infrastructure, model development, and applications; ByteDance’s Doubao follows at 27%
- DeepSeek’s projected market share contracted from 33% to 18% among surveyed technology executives
- Morgan Stanley maintains Alibaba as “Top Pick” with Overweight rating and $180 price target
- China IT budget growth projections reached record low of 4.8%, declining from 12.6% in previous survey
Alibaba (BABA) currently trades near $131.50, experiencing modest daily weakness, though Morgan Stanley’s latest survey positions the company as China’s dominant AI player with stronger long-term prospects.
Alibaba Group Holding Limited, BABA
The firm’s AlphaWise 1H26 China CIO Survey, compiled from responses by 60 chief information officers during March and April, revealed Alibaba establishing clear separation from competitors. The percentage of CIOs selecting Alibaba for AI implementation jumped to 41%, advancing from 32% in the previous edition.
Thirty percent of surveyed CIOs anticipate Alibaba will command the largest portion of fresh AI expenditure in 2026, securing the top position. ByteDance’s Doubao platform ranked second with 27%.
DeepSeek, which demonstrated significant traction in the earlier survey, experienced a notable decline in projected market share—dropping from 33% to 18%. Morgan Stanley analysts explained this shift resulted from Qwen’s regular model enhancements and ByteDance’s robust marketing campaigns, while DeepSeek maintained its quieter research-oriented strategy.
Morgan Stanley analyst Gary Yu maintained his Overweight rating on BABA while keeping his price target at $180. The broader Street sentiment aligns favorably—the stock holds a Strong Buy consensus based on 15 Buy ratings and two Holds from the past three months. The average price target stands at $185.41, suggesting approximately 45.6% potential upside from present levels.
Cloud Division Powers Revenue Expansion
Morgan Stanley forecasts Alibaba’s cloud segment will expand more than 40% year-over-year, fueled by escalating AI requirements and expanding platform adoption. Recent pricing adjustments across cloud offerings—including 5% to 34% increases on T-Head AI chips and roughly 30% higher cloud storage fees—have maintained strong customer demand.
AI expenditure as a proportion of IT budgets is forecast to approach double, climbing from 6.1% in 2025 to 12.1% in 2026. This represents a significant transformation, positioning Alibaba favorably to secure substantial market opportunity.
Challenges exist, however. Elevated investment in AI products like Qwen has increased operational costs, creating near-term earnings headwinds. Anticipated narrowing of losses in the company’s quick commerce division could provide partial offset to this pressure moving forward.
Challenging Environment for China Technology Sector
The survey revealed concerning trends for China’s broader technology market. CIOs reduced their 2026 IT budget growth projections to 4.8%—representing the lowest reading since Morgan Stanley initiated the survey in 2020 and marking a steep decline from 12.6% previously.
Geopolitical friction, deflationary pressures, and rapid AI evolution are driving conservative CIO planning. Close to half—47%—indicated most AI project rollouts have been postponed to 2027.
One noteworthy development: AI initiatives are increasingly consuming traditional software allocations. The portion of AI funding sourced from existing software budgets increased to 22%, up from 10% in the prior survey. Software’s total contribution to AI spending decreased from 46–47% to 40%, while hardware’s share expanded.
Regarding public cloud, adoption is projected to accelerate throughout the next three years, with Alibaba retaining its leadership position and ByteDance and Huawei making incremental advances.
