Alibaba shares accelerated this month after the Chinese e-commerce giant announced a series of new artificial intelligence models. “Alibaba’s approach to having a wide range of AI models [is] “It’s a smart strategic move that sets it apart from other players and is designed with efficiency in mind. A single large model with vast functionality may not be practical in an AI market that doesn’t require complex search or calculations,” said Brian Ticanko, an analyst at Stansbury Research. U.S.-traded stocks also rose at their fastest pace since January, and “BABA appears to be accelerating its investments in AI.” Bernstein analysts said in an April 13 note, “We believe increased investment is necessary in the race to gain and maintain an advantage in the AI space,” reiterating an overweight rating. The target price for Alibaba’s U.S.-listed shares is set at $186. Bernstein analysts estimate that Alibaba’s AI investments in the March quarter will nearly double from the previous quarter to about 20 billion yuan ($2.93 billion). “BABA management has recently guided us to achieve this goal” of reaching $100 billion in annual revenue from AI and cloud over the next five years. If that goal is achieved, the current investment seems well justified. ” They didn’t appreciate Alibaba’s spending on free milk tea in its marketing campaign for AI app Qwen. But they were optimistic that the company’s cloud business would benefit from its ability to raise prices. In contrast to chatbots, which are free to use, tools like OpenClaw AI agents and video generation increase incentives for local residents to pay for AI capabilities. Alibaba’s latest AI model, announced Thursday, is a so-called world model that can create 3D environments used in games, and analysts say it can better replicate the real physical world than existing chatbot models. A few days earlier, Alibaba revealed that it was developing an AI model to train robots. The company also revealed that it is developing an AI video generation model that exceeds ByteDance’s viral Seedance 2.0. “The successful development and release of the HappyHorse-1.0 video model will likely be seen as a significant achievement for Alibaba’s model stack, as video generation expertise in China was previously dominated by ByteDance and Kuaishou,” according to Artificial Analysis rankings.Citi analysts said in an April 10 note that they rate Alibaba’s U.S.-listed stock a buy with a price target of $205. “We believe the growing popularity of the HappyHorse model could lead to higher token monetization and greater cloud revenue opportunities, as video models require significantly more tokens than text-based models. “That said, HappyHorse’s potential success suggests that Kuaishou’s Hong Kong-traded stock is struggling to turn around after its price has nearly halved since its January high.” Privately held ByteDance has been increasingly viewed as an all-round AI leader in China in recent months, with analysts at Bank of America saying in an April 10 report that Happy Horse’s release “could open up enterprise AI opportunities” for Alibaba and calling the company “one of the most attractive AI businesses in China.” The Doubao chatbot, Seedance video generation tool, and cloud computing service is valued at more than $600 billion, reportedly doubling in less than a year. By contrast, the company has also invested extensively in startups, including earlier this month leading a $290 million investment round to back Chinese startups that are building global models. Based on Alibaba’s investor conference, the company’s “strategic ambitions are becoming easier to understand,” he said. “Alibaba’s management hopes that investors will value cloud not only as a traditional infrastructure business, but also as a broader AI stack with increased monetization potential through model services, token consumption, and application layer utilization.” “This is a constructive framework for the medium term as it expands the set of value drivers that investors should focus on.” CNBC’s Michael Bloom contributed to this report.
