Nomura thinks the potential IPO of T-Head is likely to boost the value of Alibaba (BABA) in the near term.
Several media outlets reported last week that Alibaba (BABA) has decided to support a separate listing of its T-head chip business, although the company has not issued an official confirmation.
Nomura’s analysis suggests that an IPO of T-head looks plausible. “Until most recently, BABA had deliberately protected its chip business from any outside attention, likely due to concerns about geopolitical risks, in our view. In light of the stabilizing US-China relations and with T-head rapidly expanding its client base, we are inclined to believe that it would be increasingly difficult for BABA to keep T-head (under AliCloud) away from outside attention,” highlighted analysts Jialong Shi and Rachel Guo.
Alibaba created T-Head in 2018 out of its research organization to design chips for cloud, AI, and IoT. Alongside CPUs and IoT chips, T-Head expanded into AI accelerators, with a newer generation of AI chips.
Nomura reiterated its Buy rating on Alibaba (BABA) and boosted its price target to $237.
Shares of Alibaba (BABA) are up 18% on a year-to-date basis and have doubled in the past 52 weeks.