TLDR
- Morgan Stanley’s China CIO Survey named Alibaba the top AI winner in China, with 41% of CIOs selecting it for AI deployment, up from 32%
- Alibaba’s Qwen model leads across cloud, models, and applications; ByteDance’s Doubao is the closest challenger at 27%
- DeepSeek’s expected market share dropped from 33% to 18% among surveyed CIOs
- Morgan Stanley reiterates Alibaba as a “Top Pick” with an Overweight rating and $180 price target
- Overall China IT budget growth outlook hit a record low of 4.8%, down from 12.6% in the prior survey
Alibaba (BABA) is trading around $131.50, down slightly on the day, but the longer-term picture looks brighter after a fresh Morgan Stanley survey placed it at the top of China’s AI landscape.
Alibaba Group Holding Limited, BABA
The bank’s AlphaWise 1H26 China CIO Survey, pulled from 60 chief information officers in March and April, found Alibaba pulling away from the pack. The share of CIOs choosing Alibaba for AI deployment climbed to 41%, up from 32% in the prior survey.
Thirty percent of CIOs expect Alibaba to capture the biggest slice of new AI spending in 2026, putting it in first place. ByteDance’s Doubao came in second at 27%.
DeepSeek, which had strong momentum in the last survey, saw its expected market share fall sharply — from 33% down to 18%. Morgan Stanley analysts attributed this to Qwen’s consistent model updates and ByteDance’s aggressive marketing, contrasting with DeepSeek’s quieter research-focused approach.
Morgan Stanley analyst Gary Yu kept his Overweight rating on BABA and held his price target at $180. Wall Street broadly agrees — the stock carries a Strong Buy consensus from 15 Buy ratings and two Holds over the past three months. The average price target sits at $185.41, implying around 45.6% upside from current levels.
Cloud Growth Doing the Heavy Lifting
Morgan Stanley expects Alibaba’s cloud business to grow more than 40% year-over-year, driven by rising AI demand and broader platform usage. Recent price hikes across cloud services — including a 5% to 34% increase on T-Head AI chips and a roughly 30% rise in cloud storage costs — haven’t slowed demand.
AI spending as a share of IT budgets is projected to nearly double, from 6.1% in 2025 to 12.1% in 2026. That’s a meaningful shift, and Alibaba appears well-positioned to capture it.
There’s a catch, though. Higher investment in AI products like Qwen has pushed costs up, dragging on near-term earnings. Losses in the company’s quick commerce unit are expected to narrow, which could help offset some of that pressure down the line.
Tough Backdrop for China IT
The survey didn’t paint a rosy picture for China’s broader IT market. CIOs trimmed their 2026 IT budget growth forecast to 4.8% — a record low since Morgan Stanley started the survey in 2020 and a sharp fall from 12.6% previously.
Geopolitical tensions, deflation, and fast-moving AI development are all making CIOs cautious. Nearly half — 47% — said most AI project launches have been delayed to 2027.
One trend worth watching: AI is starting to eat into traditional software budgets. The share of AI funding drawn from existing software budgets rose to 22%, up from 10% in the prior survey. Software’s overall share of AI spending slipped from 46–47% to 40%, while hardware’s share grew.
On public cloud, adoption is expected to accelerate over the next three years, with Alibaba holding its lead and ByteDance and Huawei gaining ground.
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