Alibaba (BABA) Stock: Morgan Stanley Survey Crowns It China’s Leading AI Player

Table of Contents Alibaba (BABA) shares are hovering near $131.50, experiencing modest daily declines, yet the company’s long-term prospects appear considerably more optimistic following a recent Morgan Stanley survey that crowned it China’s premier AI player. Alibaba Group Holding Limited, BABA The investment bank’s AlphaWise 1H26 China CIO Survey, which gathered responses from 60 chief information officers during March and April, revealed Alibaba establishing a commanding lead over competitors. The percentage of CIOs selecting Alibaba for AI implementation jumped to 41%, representing a significant increase from the 32% recorded in the previous survey period. Thirty percent of surveyed CIOs anticipate Alibaba will secure the largest portion of new AI expenditures in 2026, positioning it at the forefront. ByteDance’s Doubao ranked second with 27% support. DeepSeek, despite demonstrating strong performance in the previous survey, experienced a dramatic decline in projected market share — dropping from 33% to just 18%. Morgan Stanley researchers explained this shift resulted from Qwen’s regular model enhancements and ByteDance’s intensive marketing campaigns, which stand in stark contrast to DeepSeek’s more subdued research-oriented strategy. Morgan Stanley’s Gary Yu maintained his Overweight rating on BABA while reaffirming his $180 price objective. The broader Wall Street community shares this optimism — the stock holds a Strong Buy consensus rating with 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 present levels. Morgan Stanley projects Alibaba’s cloud division will expand by more than 40% on a year-over-year basis, fueled by escalating AI demand and expanded platform adoption. Recent pricing adjustments across cloud offerings — including 5% to 34% increases on T-Head AI chip services and roughly 30% higher cloud storage fees — have not dampened customer appetite. AI expenditures as a percentage of overall IT budgets are forecast to nearly double, rising from 6.1% in 2025 to 12.1% in 2026. This represents a substantial transformation, and Alibaba seems strategically positioned to benefit from this transition. However, challenges exist. Increased investment in AI offerings like Qwen has elevated operational costs, creating near-term pressure on profitability. Losses within the company’s quick commerce division are anticipated to decrease, which may help counterbalance some of this expense burden moving forward. The survey revealed concerning trends for China’s broader information technology sector. CIOs reduced their 2026 IT budget growth projections to just 4.8% — marking a record low since Morgan Stanley initiated this survey in 2020 and representing a dramatic decline from the 12.6% previously forecasted. Geopolitical uncertainties, deflationary pressures, and rapid AI evolution are all contributing to CIO hesitation. Nearly half of respondents — 47% — indicated that most AI project rollouts have been postponed until 2027. An emerging trend deserves attention: AI initiatives are increasingly competing with traditional software budgets. The proportion of AI funding sourced from existing software allocations rose to 22%, up from just 10% in the prior survey. Software’s total share of AI spending decreased from 46–47% to 40%, while hardware’s portion expanded. Regarding public cloud infrastructure, adoption rates are expected to increase over the next three-year period, with Alibaba maintaining its dominant position and both ByteDance and Huawei making notable advances.