Robin Xing Chief China Economist Robin.Xing@morganstanley.com +852 2848-6511 For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. Downloaded by Neil.Wang@troweprice.com Not for redistribution without written consent of Morgan Stanley M Foundation March 23, 2026 05:49 AM GMT Investor Presentation | Asia Pacific China Macro Themes Morgan Stanley Asia Limited+ Foundation M Mapping the Oil Shock Impact on China Source: Morgan Stanley Rese ...

March 19, 2026 07:10 AM GMT Investor Presentation | Asia Pacific China's AI Path: Monetizing Surging Token Use via AI Cloud Amid a five-year CAGR of 72% for AI cloud in China, Alibaba is the key winner via full stack leadership. It is our Top Pick with F27E cloud growth of 45% (Street high). Potential cloud price hikes could lead our bull case value of US$260 to be realized. | Downloaded by Neil.Wang@troweprice.com Not for redistribution without written consent of Morgan Stanley M | Morgan Stanley Asia Limi ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **AI Cloud** industry in China, which is projected to experience a **CAGR of 72%** from 2024 to 2029, reaching a total addressable market (TAM) of **Rmb 218 billion** by 2029 [doc id='47'][doc id='80']. - The AI Cloud market includes **GenAI-related IaaS** (Infrastructure as a Service) and **MaaS** (Model as a Service), with GenAI expected to grow from **6%** of the mix in 2024 to **39%** by 2029 [doc id='48']. Company Highlights - **Alibaba (BABA)** is identified as the **Top Pick** in the AI Cloud sector, with a price target of **US$180** and expected cloud growth of **45%** for F27, which is the highest forecast on the street [doc id='3'][doc id='54']. - The **bull case** for Alibaba's cloud revenue growth is projected at **50%** with an EBITA margin of **12%** in F27E and **14%** in F28E, compared to a base case of **9%** and **10%** [doc id='4']. - **ByteDance** is recognized as a significant competitor, emerging as a **disrupter** in the AI cloud market, particularly in the IaaS segment [doc id='45']. Market Dynamics - The AI cloud market is entering its **first pricing hike cycle** in 20 years, with global hyperscalers like GCP and AWS already increasing prices. This trend is expected to follow in China, potentially leading to margin expansion opportunities [doc id='44']. - **Demand for tokens** is surging, driven by both training and inference workloads, with inference expected to become the primary growth driver [doc id='102']. - **Supply constraints** in chipsets are a significant concern, but improvements in domestic chipset capacity are anticipated to alleviate these issues starting in **2H26** [doc id='128']. Competitive Landscape - The competitive landscape is shifting towards a **two-horse race** between Alibaba and ByteDance, with both companies investing heavily in infrastructure and service capabilities [doc id='45']. - **Tencent** is also highlighted as a strong player in AI applications, leveraging its extensive social network [doc id='55']. - **Baidu** is rated as **Equal Weight (EW)** due to its lagging position in cloud presence and application layers compared to leading players [doc id='56']. Risks and Catalysts - Key catalysts for growth include Alibaba's cloud and capex guidance, potential news on major cloud price hikes, and innovations in AI applications [doc id='6']. - Upside risks involve stronger-than-expected AI agent development and chipset export control relief, while downside risks include intense competition and slower public cloud adoption due to security concerns [doc id='58']. Financial Metrics - Alibaba's cloud revenue growth was reported at **34% YoY** in the September quarter of 2025, driven by increased adoption of AI-related products [doc id='82']. - The public cloud market in China is expected to grow from **US$45 billion** in 2024 to **US$105 billion** by 2029, with IaaS being the largest segment [doc id='59']. Conclusion - The AI Cloud market in China is poised for significant growth, with Alibaba and ByteDance leading the charge. The anticipated pricing hikes and increasing demand for AI services present substantial opportunities, while supply constraints and competition remain critical factors to monitor.