BABA(US:BABA) Hua Er Jie Jian Wen·2025-10-02 02:40Core Insights - Morgan Stanley significantly raised Alibaba's target price, indicating that the company is building an unprecedented business flywheel by converting AI token revenues from its cloud business into advantages for its e-commerce platform [1] - Alibaba's stock has outperformed the Chinese internet index by 364 percentage points over the past three months, with analysts believing this is just the beginning [1] Group 1: AI Cloud Business Growth - Alibaba Cloud's revenue grew by 26% year-on-year in Q2 2025, marking the eighth consecutive quarter of increasing growth rates, driven primarily by demand for generative AI [2] - The rapid adoption of generative AI across various industries is expected to surpass the previous SaaS wave, enhancing efficiency across multiple functions with minimal deployment friction [2] Group 2: Synergy Between Generative AI and E-commerce - Alibaba's unique advantage lies in the deep integration of its AI capabilities with its vast e-commerce ecosystem, showcasing powerful AI models and applications at the 2025 Cloud Summit [3] - By mid-2025, Alibaba had built over 800,000 AI agents on its Magic Dock platform, which can automate and optimize various aspects of merchant operations [3] Group 3: Strategic Investment in AI and Cloud Infrastructure - Alibaba has committed to investing at least 380 billion RMB (approximately 52-53 billion USD) over three years in AI and cloud infrastructure, reflecting its "full-stack + open" strategy [4] - The company is matching large-scale cloud and database services with self-developed silicon chips and rapidly iterating model layers, creating a comprehensive funnel from computation to application [4] Group 4: Redefining Business Models Through Efficiency - The efficiency gains from AI technology in Alibaba's ecosystem will lead to reduced operational costs for merchants and improved conversion rates for consumers, while Alibaba can reprice its services [6] - Analysts predict that consumers will be the biggest beneficiaries, but Alibaba can also monetize some of the incremental surplus through improved efficiency and advertising returns [6] Group 5: Valuation and Market Positioning - Morgan Stanley raised Alibaba's target prices to 245 USD for US shares and 240 HKD for Hong Kong shares, reflecting a shift in narrative from a "loser in domestic e-commerce market share" to a "top-tier Chinese internet asset" [6] - The current stock price corresponds to a 12x expected P/E ratio for FY2028, indicating significant room for valuation adjustments [7]