Investing.com -- Alibaba has emerged as the biggest winner in China’s AI race, according to a new survey by Morgan Stanley, as overall IT spending growth falls to a record low amid growing economic pressures.

The bank’s AlphaWise 1H26 China CIO Survey, conducted among 60 chief information officers (CIOs) in March and April, found Alibaba’s Qwen model consolidating its lead across nearly all AI technology stacks, including cloud, models, and applications.

The share of CIOs selecting Alibaba to assist with AI deployment rose to 41% from 32% in the previous survey, while 30% of respondents expect Alibaba to capture the largest incremental share of AI spending this year, ranking it first, with ByteDance’s Doubao emerging as a clear challenger at 27%.

"Alibaba is the biggest winner due to its full-stack AI capabilities," Morgan Stanley analysts led by Yang Liu said in a note.

DeepSeek, meanwhile, saw its momentum fade notably. The proportion of CIOs expecting it to gain the most market share dropped to 18% from 33% in the last survey.

“We think the Qwen series of models’ good performance and consistent iteration, as well as ByteDance’s high-profile marketing (vs. DeepSeek acting as a low-profile research house with longer model iteration cycle) are the reasons behind the change,” the analysts wrote.

The vendor findings come against a difficult backdrop for China’s broader IT market. CIOs cut their 2026 IT budget growth outlook to 4.8%, a record low since Morgan Stanley began its China CIO surveys in 2020, down sharply from 12.6% in the previous survey.

The bank pointed to geopolitical tensions, including the U.S.-Iran conflict that escalated from late February 2026, persistent deflation, and fast-evolving AI technology as factors prompting CIOs to hold back spending.

AI itself remains the top investment priority, with 37% of CIOs identifying it as the area most likely to see the largest spending increase, up from 30% in the prior survey. The share of IT budgets allocated to AI is projected to nearly double from 6.1% in 2025 to 12.1% in 2026.

“But the launch of first AI projects has generally been delayed, with most CIOs (47%) eying 2027,” the analysts noted.

The survey also found signs that AI is beginning to cannibalize traditional software budgets. The share of AI funding drawn from existing software budgets rose to 22% from 10% previously, lending some support to fears that "AI eats software."

Software’s share of overall AI spending slipped to 40% from 46-47% in prior surveys, while hardware’s share increased.

On cloud infrastructure, public cloud adoption is expected to accelerate over the next three years, with Alibaba maintaining its leading position and ByteDance and Huawei gaining ground. Over half of CIOs surveyed expect cloud service prices to rise over the next 12 months.