Key Takeaways:
- Goldman Sachs keeps cloud and data centers as its top China subsector for 2H26
- BBAT combined capex estimated at $100 billion for full-year 2026
- Alibaba and Tencent seen at inflection points for EPS and valuation respectively
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Goldman Sachs names 4 China cloud stocks as top picks for 2H26
Goldman Sachs reiterated cloud and data centers as its most favored China subsector for the second half of 2026, naming Alibaba Group Holding Ltd., GDS Holdings Ltd., VNET Group Inc. and Kingsoft Cloud Holdings Ltd. as key recommendations.
"Cloud service price hikes and continued token expansion will drive revenue growth and margin expansion, alongside higher capital expenditure by hyperscalers," the Goldman Sachs team said in a report published Tuesday.
The broker forecasts China daily token usage will reach 350 trillion by year-end, equivalent to 10.5 quadrillion tokens per month by December 2026. It estimates ByteDance, Baidu Inc., Alibaba and Tencent Holdings Ltd. — collectively referred to as BBAT — will record total capital expenditure of $100 billion for full-year 2026, with a heavier weighting in the second half supporting accelerated quarter-on-quarter growth for data centers.
The report re-evaluated five key investor debates shaping China's AI landscape: competitive dynamics between US and Chinese AI models, intensifying price competition among domestic model providers, exponential token growth drivers, the capital expenditure and free cash flow outlook of hyperscalers, and the form factors of agentic AI.
Goldman Sachs raised gaming and entertainment to its second-highest investment priority, adding NetEase Inc. as a new recommendation alongside Tencent. It downgraded e-commerce and mobility to third place but reiterated JD.com Inc. as a key pick for 2H26, saying the second quarter will mark its toughest year-on-year comparison before revenue and profit resume growth. Among AI model companies, ranked fourth, the broker highlighted MINIMAX-W, citing upside potential in annual recurring revenue.
The broker said Alibaba has bottomed its earnings-per-share downgrade cycle, with an inflection expected in 2H26. Tencent has bottomed in valuation multiples at 12 times, already the lowest level among China and global peers during cyclical downturns, it said.
The recommendations signal that Goldman Sachs sees the China AI infrastructure buildout as the most direct way to play the theme. Investors will watch for second-half capex announcements from BBAT companies and cloud pricing trends as key catalysts for the sector.
This article is for informational purposes only and does not constitute investment advice.
[1] G Sachs: Cloud and Data Center Subsector Still Most Favored for 2H; Recommends Alibaba Group Holding Limited (BABA.US), GDS Holdings Limited (GDS.US), VNET Group, Inc. (VNET.US), Kingsoft Cloud Holdings Limited (KC.US)[2] G Sachs: Cloud and Data Center Subsector Still Most Favored for 2H; Recommends Alibaba Group Holding Limited (BABA.US), GDS Holdings Limited (GDS.US), VNET Group, Inc. (VNET.US), Kingsoft Cloud Holdings Limited (KC.US) - AASTOCKS.com
