Morgan Stanley says this China name is 'a global AI winner'

Investing.com -- Companies capable of building and integrating the full AI stack — chips, cloud infrastructure, models and applications — are best positioned to capture long-term value from the technology, according to Morgan Stanley.

“Ownership of the full AI stack — chips, cloud infrastructure, models, and applications — will differentiate long-term AI winners from laggards,” the bank’s analysts said in a note.

On that basis, the Wall Street firm said Alibaba (NYSE: BABA) stands out among China’s large internet platforms.

The analysts see the tech giant as “a global AI winner,” citing its in-house semiconductor development, large cloud infrastructure and expanding ecosystem of AI models and applications.

As such, they upgraded Alibaba to their top pick, replacing Tencent, despite near-term pressure on earnings.

The company’s chip unit T-Head is a central pillar of that strategy. Developing proprietary AI chips allows internet platforms to reduce reliance on third-party suppliers, optimize hardware for specific workloads and improve cost efficiency, particularly in an inference-heavy AI market such as China.

According to Morgan Stanley, in-house chips can also help companies expand computing capacity during demand spikes, reduce exposure to export restrictions and lower regulatory risk by aligning with national priorities around technological self-sufficiency.

Alibaba combines those chips with its cloud infrastructure through AliCloud, a platform that integrates semiconductor development, large-scale cloud infrastructure, foundation models such as the Qwen family and application-layer services across the company’s ecosystem.

“Alibaba stands out for its in-house chips (T-Head), cloud infra (AliCloud), SOTA open-weight models (Qwen), and consumption centric applications (Qwen apps),” the analysts wrote. They believe this vertical integration “enables Alibaba to optimize the entire AI value chain and monetize AI across both infrastructure and applications.”

Morgan Stanley also highlights the growing scale of China’s AI semiconductor market. The bank projects the country’s AI chip total addressable market could reach $67 billion by 2030, with domestic supply potentially covering about 76% of demand as local capacity expands.

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