Alibaba has backed its plans to spend heavily on its artificial intelligence capabilities, as the Chinese tech giant noted solid demand for its AI and cloud computing services, according to analysts at BofA.
Citing comments from company management at a conference this week, the strategists said Alibaba reaffirmed its confidence in delivering 380 billion yuan ($53.4 billion) in capital expenditures between 2025 and 2027.
"[The company] sees robust demand for AI computing and its corresponding public cloud needs [...] from diversified external customer base and evolving internal AI use cases, which should fuel continued cloud revs acceleration in coming quarters," the strategists wrote in a note on Friday.
On Thursday, American Depositary Receipts of Alibaba surged by 8% -- notching its highest close since November 2021 -- after the group said it plans to raise $3.2 billion through the sale of a zero-coupon convertible bond. The proceeds will be partly used to bolster the firm’s cloud offerings, it added.
Meanwhile, Alibaba has unveiled a new -- and possibly more efficient -- AI model, dubbed Qwen.
The BofA analysts also flagged that Alibaba executives moved to address investors’ concerns around U.S. chip export controls by "elaborating on its one-cloud multi-chip approach and various back up supply chain solutions."
A report in The Information earlier this week said Alibaba and Chinese tech industry peer Baidu have both begun to use internally designed chips to train their AI models. Citing people with direct knowledge of the matter, The Information said the chips partly replace processors made by AI-darling Nvidia.
Facing steadily more U.S. export restrictions on advanced AI chips to China, Beijing has reportedly been placing more pressure on domestic businesses to utilize home-grown technology.
Raising their price target for Alibaba’s ADRs to $168 from $152, the BofA strategists led by Joyce Ju also highlighted the company’s new mapping app Amap as "an early-stage attempt to explore growth strategies for life services." The service presents competition to rival Meituan by including its own ranking of hotels, restaurants and tourist destinations.
On Friday, ADRs in Alibaba were slightly lower in premarket U.S. trading.
Source :
https://www.investing.com/news/stock-market-news/bofa-raises-price-target-for-alibaba-amid-robust-ai-demand-4236793
