Alibaba (BABA) has spent the past year investing heavily in artificial intelligence (AI) and cloud infrastructure, raising questions about when those investments would begin to translate into meaningful growth. Now, Morgan Stanley believes that shift may already be underway.
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The firm’s analyst, Gary Yu, reiterated an Overweight rating and a $180 price target, pointing to improving cloud trends, steady margins, and early signs that Alibaba’s AI push is starting to pay off.
Cloud Price Hike Points to Demand Strength
A key part of that view centers on Alibaba’s recent cloud pricing changes.
The company has raised prices for parts of its cloud business, including AI-related services. It said it will raise prices for its T-Head AI chips by 5% to 34% and increase cloud storage costs by about 30%. While such moves can sometimes weigh on demand, Morgan Stanley sees it differently. According to Yu, the price hike should support near-term cloud growth, suggesting that demand remains strong enough to absorb higher costs.
At the same time, profitability remains intact. The firm expects Alibaba to maintain long-term cloud margins of around 20%, indicating that the company is not trading growth for margins.
Qwen App Signals Next Phase of AI Strategy
Beyond cloud, Alibaba is also pushing ahead with its broader AI plans. One area drawing attention is the Qwen app, a consumer-facing AI platform. Yu described this as a strategically important step, as it shifts Alibaba from mainly serving businesses to also engaging directly with users.
That shift could open up new ways to generate revenue over time, especially as AI tools become more integrated into everyday use.
At the same time, Morgan Stanley expects losses in the company’s quick commerce unit to come down in the March quarter compared to the previous quarter. This suggests Alibaba is improving efficiency even as it continues to invest in AI.
Is Alibaba Stock a Buy Now?
Wall Street remains constructive on the stock. Alibaba carries a Strong Buy consensus rating based on 16 Buy ratings and two Holds over the past three months. The average BABA price target stands at $187.23, suggesting roughly 49.24% upside from current levels.
