UBS boosted its price target for Alibaba to HKD 179, reframing the company as a primary proxy for China's AI supply chain. The bank's valuation model suggests AI assets alone are worth nearly the current market cap, excluding the core e-commerce business.
Alibaba Group Holding Ltd. shares jumped nearly 8% after UBS raised its price target to HKD 179, arguing the company's investment case now centers on its role in China's artificial intelligence buildout.
A UBS research report noted that Alibaba's investment theme is no longer centered on earnings growth, but rather on its role as a representative of China's AI supply chain.
The bank lifted its Hong Kong-listed share target from HKD 166 to HKD 179, implying roughly 25% upside from the opening price of HKD 143.1 on Tuesday. UBS also raised its US-listed share target to $184 from $170.
The move suggests a potential re-rating for the stock, decoupling its valuation from a slowing core e-commerce business to focus on high-growth AI assets. UBS estimates the combined value of Alibaba's AI assets—including its T-Head chip unit and cloud services—is already near the company's market capitalization.
This valuation shift follows quarterly results where Alibaba reported a 38 percent surge in its Cloud Intelligence Group revenue, driven by AI demand. However, heavy investments in AI and other ventures caused adjusted net income to plummet nearly 100 percent year-over-year, weighing on the stock.
UBS acknowledged the pressure, lowering its earnings per share forecasts for fiscal 2027-2028 by 8% to reflect higher AI investment and reduced e-commerce profitability.
The bank's thesis posits that revenue growth, adoption of its MaaS platform, and new AI model launches will now be the primary drivers for the share price, rather than traditional earnings metrics.
The positive market reaction to the analyst note indicates investors may be willing to look past near-term profit erosion for long-term AI growth. Investors will now watch for evidence that Alibaba's significant AI spending can translate into sustained revenue growth and eventual margin recovery in its upcoming quarterly reports.
This article is for informational purposes only and does not constitute investment advice.
