JP Morgan released a report stating that market news indicates Alibaba Group Holding Limited (09988.HK) is considering spinning off its AI chip division, T-Head, for an IPO. Alibaba may first restructure T-Head into a company with employee stock ownership before exploring an IPO, although the specific timeline remains unclear. T-Head was established in 2018 and primarily develops chips for data centers, artificial intelligence, and the Internet of Things, serving as a core component of Alibaba's "AI + Cloud Infrastructure" strategy. Alibaba has not commented on this matter.
The bank noted that the aforementioned report is surprising, as it suggests Alibaba is reconsidering the possibility of unlocking value through the capital markets. Based on rough estimates, referencing industry EV/revenue multiples and aggressive revenue assumptions for 2026, if T-Head were to go public independently, its valuation could range from $25 billion to $62 billion (approximately HKD 195 billion to HKD 483.6 billion), accounting for about 6-14% of Alibaba's current market value. The bank believes this is more of a short-term sentiment catalyst rather than a near-term profit driver.
JP Morgan stated that due to the limited disclosure of relevant information, many key questions remain unanswered, including the credibility of the report, equity ratios and dilution, governance, and related transactions. Therefore, the bank adopted a simplified framework: measuring the "market-implied option value" rather than a complete semiconductor fundamental model. The bank anticipates that even if Alibaba intends to spin off T-Head, investors, exchanges, and regulatory bodies will scrutinize its independence. Given T-Head's high dependency on its parent company, Alibaba will need time to expand external customer designs and orders, strengthen independent governance and employee stock ownership mechanisms, and establish clearer independent economic relationships, which typically takes over a year, making a spin-off this year unlikely.
The bank mentioned that the market will maintain a "discount" on the aforementioned rumors, as Alibaba has previously announced spin-offs only to retract them: in November 2023, it canceled the spin-off of its cloud business due to uncertainties arising from U.S. chip export restrictions; in March 2024, it abandoned the IPO of Cainiao and instead chose to repurchase shares from minority shareholders. The bank maintains an "Overweight" rating on Alibaba with a target price of HKD 210