CICC: Maintains Alibaba-W "Outperform Industry" Rating with a Target Price of HKD 197

According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that Alibaba (09988, BABA.US) is currently trading at 22 and 18 times the FY26 and FY27 non-GAAP price-to-earnings ratios in both the Hong Kong and US stock markets. The firm maintains its revenue and profit forecasts unchanged, using a sum-of-the-parts (SOTP) valuation, assigning a 15x P/E to the e-commerce business and a 7x P/S to the cloud computing business for FY27, corresponding to target prices of USD 204 and HKD 197 for the US and Hong Kong stocks, respectively. This is mainly due to positive progress in cloud computing and an upward shift in valuation benchmarks, raising the previous target prices by 34% and 35%, while maintaining an outperform rating, indicating an upside potential of 24% and 25% compared to the current stock prices in Hong Kong and the US.

CICC's main points are as follows:

Company Status

The firm was invited to attend the 2025 Alibaba Cloud Summit. At the conference, Alibaba Group CEO and Chairman of Alibaba Cloud Intelligence Group Eddie Wu mentioned the three stages of the super artificial intelligence journey, stating that Alibaba Cloud's positioning is as a full-stack AI service provider and announced increased investment in infrastructure. Alibaba Cloud Intelligence Group CTO Zhou Jingren elaborated on Alibaba Cloud's layout and latest progress from the perspectives of large models, AI applications, and AI infrastructure.

Further Investment in Alibaba Cloud

Alibaba stated that it is actively promoting the construction of AI infrastructure worth 380 billion yuan and plans to increase investment further. Compared to 2022, by 2032, the energy consumption scale of Alibaba Cloud's global data centers will increase tenfold. NVIDIA indicated that every 1GW of incremental energy consumption requires an investment of USD 50 billion in AI infrastructure. Even considering the differences in construction costs and chip usage between China and the US, the firm expects that the upward trend in data center energy consumption implies significant CAPEX investment and substantial increases in AI-related revenue.

Tongyi Releases a Series of New Models, Creating an Operating System for the AI Era

Recently, Tongyi released its trillion-parameter flagship model Qwen MAX, the native multimodal large model Qwen3-Omni, the visual understanding model Qwen3-VL, the open-source image editing model Qwen-Image, the upgraded Qwen3-Coder, the audio-visual synchronization creative engine Tongyi Wanxiang 2.5 preview, and the enterprise-level voice foundation large model Tongyi Bailin, with comprehensive enhancements in model capabilities. The firm believes that Tongyi is a global leader in the open-source model ecosystem, with over 170,000 derivative models, ranking first in the world in terms of the number of derivative models, serving as the operating system for the AI era.

The firm believes that Alibaba Cloud possesses full-stack capabilities in the era of artificial intelligence, from Tongyi large models, Bailian, and PAI to China's leading AI infrastructure and computing network. Alibaba Cloud has a leading supply-side advantage and developer stickiness. As AI demand continues to grow, Alibaba Cloud will benefit across various dimensions. The firm is optimistic about the continuous release of Alibaba Cloud's commercial value and its ongoing boost to the company's valuation.

Risk Warning: Uncertainties in the macro economy and regulation, intensified competition, and AI progress falling short of expectations