TLDR
- Bernstein SocGen cut its BABA price target to $165 from $180, while keeping an Outperform rating
- Alibaba stock has dropped about 5% since announcing a $10.2 billion equity raise on Aug. 23
- Investors questioned why Alibaba raised new capital when it already held $30.7 billion in net cash
- Bernstein’s analysis shows AI chip investments could pay back in 2.5 to 3 years
- Wall Street holds a Strong Buy consensus on BABA with an average price target of $189.46
Alibaba (BABA) stock is trading at $113.24, down roughly 5% since the company announced a $10.2 billion equity raise on Aug. 23 to fund its AI expansion.
Alibaba Group Holding Limited, BABA
Bernstein SocGen analyst Robin Zhu acknowledged investor frustration and cut his price target on BABA to $165 from $180, a reduction of about 8%. He kept his Outperform rating on the stock.
Zhu said it is “not hard to sympathise” with investors who are unhappy with the deal. The core complaint is straightforward: why raise new capital when the company already holds $30.7 billion in net cash?
The equity raise involves the primary placement of 710 million shares at a discounted price. Alibaba chairman Joe Tsai purchased 720,000 Hong Kong-listed shares shortly after the announcement, a move that signals some internal confidence in the company’s direction.
Capital spending at Alibaba rose 75% year over year to approximately $10.07 billion in its latest results, showing the scale of its AI push.
Bernstein Sees Faster-Than-Expected Payback
Despite the concerns, Zhu’s analysis suggests the AI spending could deliver returns faster than many investors expect.
Bernstein built a data-centre model around Alibaba’s existing Zhenwu 810E chip. The firm estimates a three-year payback on capital expenditure for that chip.
The newer M890 chip looks even better. Commercial deployment began in August, and channel feedback points to a 2.5-year payback period.
Online prices for server rentals have continued to rise in recent months, pointing to strong demand for AI infrastructure.
Discussions with key customers also suggest the market remains tight, which supports the case for continued investment.
Bernstein’s research drew on feedback from Alibaba, AI labs, and contacts across the AI and semiconductor supply chains.
InvestingPro data shows Alibaba holds more cash than debt on its balance sheet, which reinforces its financial position despite the new raise.
Where Other Analysts Stand
Baird has also lowered its price target for Alibaba, cutting it to $160 from $164. The firm cited margin pressure from aggressive AI investment and a tough e-commerce environment.
Mizuho took a different view, reiterating an Outperform rating with a $195 price target. The firm pointed to strong cloud growth and margin expansion driven by AI demand.
BofA Securities has maintained its Buy rating on the stock following the capital raise.
Alibaba also recently launched the Qwen3.8-Flash, an AI model with 125 billion parameters designed to compete with offerings from Anthropic and DeepSeek.
Wall Street’s overall view on BABA remains constructive. The stock carries a Strong Buy consensus based on 12 Buy ratings over the past three months. The average price target sits at $189.46, implying roughly 67% upside from current levels.
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