Alibaba (BABA) was named Morgan Stanley’s top pick among the Chinese tech giants, as the investment firm believes it is a “global AI winner.”
Shares fell 1% in premarket trading on Thursday.
“We think owning the full AI stack (chips, cloud, models, applications) forms a structural advantage: It can make an Internet company an AI winner, as Alphabet has shown in the US,” analysts at the firm wrote in a note to clients about Alibaba. “In-house chips reduce reliance on third party suppliers, enable application-specific designs, support rapid capacity expansion during demand spikes, improve cost efficiency (lower cost per token), mitigate geopolitical exposure (US export controls), and lower regulatory risk (government support). On this premise, we view Alibaba (OW) as a global AI winner: It has top-tier in-house AI chips (T-Head), China’s #1 and the world’s #4 cloud infrastructure provider (AliCloud), the world’s most adopted SOTA open-weight foundation models (Qwen models), and consumption-centric applications (Qwen apps).”
Morgan Stanley has an Overweight rating on Alibaba.
Aside from Alibaba, Morgan Stanley also has an Overweight rating on Tencent (TCEHY). The firm pointed out that Tencent has benefited from the strength of its WeChat ecosystem, despite the current lag.
Separately, the firm has an Equal-Weight rating on Baidu (BIDU) as its Kunlunxin chip business could be a positive. However, it has “higher AI disruption risk in its core search business.”