Here’s why JPMorgan, Morningstar are bullish on Alibaba stock
News Summary
JPMorgan and Morningstar analysts are bullish on Alibaba stock, with JPMorgan boosting its target to H$240, implying a 30% upside from current levels. The primary reason for this optimism is Alibaba's significant market potential in artificial intelligence (AI) and cloud industries. Analysts highlight Alibaba's positioning to participate at every stage of AI (compute, platforms, and apps) while directly improving merchant economics. Morningstar also considers the stock undervalued, citing Alibaba's increased investment in overseas data centers, competitive performance, widespread use of its open-source models, and improved self-developed chip performance as drivers for cloud revenue growth. Alibaba is heavily investing in cloud computing and AI, having launched popular AI models in 2024 and planning over $50 billion in AI spending, including developing custom GPUs. Executives believe AI spending will soar. Investors anticipate that strong growth in its cloud and AI businesses will offset weaknesses in traditional retail and food delivery segments like Ele.me. Recent quarterly results showed international digital commerce and Cloud Intelligence Group revenues rising by 19% and 26% respectively. Technical analysis further supports the bullish trend, with Alibaba's stock having rallied nearly 200% from its 2024 lows, breaking above key resistance levels, and trading at its highest since August 2021.
Background
Alibaba experienced a challenging period in recent years after its founder, Jack Ma, publicly criticized Beijing officials for regulatory overreach. This led to the cancellation of Ant Financial's $300 billion IPO and intensified regulatory scrutiny, with accusations of stifling competition. However, regulatory criticism has recently softened, culminating in a meeting between Jack Ma and President Xi Jinping earlier this year. Ma has also returned to the company, though not as CEO. In this evolving environment, Alibaba has strategically pivoted towards cloud computing and artificial intelligence, seeking to recapture market favor and address macroeconomic headwinds through new growth vectors.
In-Depth AI Insights
Beyond analyst upgrades, what are the underlying strategic shifts driving Alibaba's recent stock surge and renewed investor confidence? - Bottoming of Regulatory Cycle & Policy Shift: Jack Ma's meeting with Xi Jinping signals a substantive end to China's regulatory crackdown on major tech platforms, conveying a government signal to encourage healthy development of tech innovation and the platform economy. This has removed a significant uncertainty premium for Alibaba. - National Strategy & Technological Self-Sufficiency: Amid intensifying US-China tech competition, the Chinese government is actively supporting domestic tech giants to achieve breakthroughs in critical areas like AI and semiconductors. Alibaba's massive investment in AI and self-developed GPUs aligns perfectly with this national strategy, positioning it as a key player in China's drive for technological autonomy. - Business Structure Optimization & Growth Engine Switch: Facing fierce competition and decelerating growth in traditional e-commerce and local services, Alibaba is accelerating its transformation towards high-growth, high-value-added cloud services and AI. This is perceived as the core engine for its next growth phase, significantly boosting market expectations for its future profitability. Given the geopolitical landscape and Trump's incumbency in 2025, what are the implications of Alibaba's investment in custom GPUs manufactured in China? - Accelerated Technological Decoupling: Alibaba's move to self-develop and manufacture GPUs in China is a direct manifestation of accelerating US-China technological decoupling. It indicates that Chinese tech companies are actively responding to government calls to reduce reliance on Western critical technologies, especially in high-end computing hardware. - Supply Chain Resilience & National Security: Under the Trump administration's continued pursuit of