JPMorgan has substantially increased its price target for Alibaba, with analysts highlighting how the company is creating an unprecedented business flywheel by transforming AI token revenue from its cloud operations into commission rate advantages on its e-commerce platforms. Over the past three months, Alibaba's stock has outperformed Chinese internet ETFs by 364 basis points, yet analysts believe this is merely the beginning.
According to trading desk sources, JPMorgan stated in its October 1st report that based on comprehensive research of Alibaba's Cloud Conference, the adoption rate of generative AI in China is expected to surpass the previous SaaS wave. Alibaba, leveraging its distinctive "full-stack + open" strategy, is positioned to establish robust value capture points across computing, platform, and application layers.
JPMorgan elevated Alibaba's US stock and Hong Kong stock price targets from $170/HK$165 to $245/HK$240 respectively. Analysts emphasized that Alibaba's narrative has shifted from "domestic e-commerce market share loser" to "China's tier-one internet asset," with AI services directly enhancing merchant operational efficiency and consumer experience, providing Alibaba opportunities to reprice advertising and tool services.
**AI Cloud Business Revenue Prospects Exceed Expectations**
Alibaba's cloud division has previously demonstrated remarkable growth momentum. In Q2 FY2025, Alibaba Cloud revenue grew 26% year-over-year, marking the eighth consecutive quarter of accelerating growth rates. JPMorgan noted this strong performance was primarily driven by generative AI demand, currently concentrated in internet, autonomous driving, and embodied intelligence sectors.
More significantly, other industries are rapidly adopting generative AI technology. JPMorgan anticipates China's generative AI adoption will exceed the previous SaaS wave because it enables broader efficiency improvements—language, vision, and agent-based workflows touch virtually all functions, while deployment friction is minimal, achievable through APIs/agents rather than complete process redesign.
Analysts predict that within 12-36 months, marketing, service, coding, finance departments, and supply chain applications will transition from tool testing to comprehensive agent automation. This transformation will drive steady service cost reductions and improve conversion rates and throughput for most consumer-facing funnels.
**Generative AI and E-commerce Synergy Effects Emerge**
Analysts indicated that Alibaba's unique advantage lies in the deep integration between its AI capabilities and massive e-commerce ecosystem. At the 2025 Cloud Conference, Alibaba showcased a comprehensive suite of powerful AI models and applications, many directly applicable to its vast merchant ecosystem.
Core AI tools include: Tongyi Wanxiang AI image and video generation platform, Tongyi Qianwen 3 image editing model, Tongyi Qianwen 3-Omni multimodal large model, and Lingyang AgentOne enterprise AI application platform. These tools enable merchants to achieve automation and optimization across content creation to customer service.
By mid-2025, Alibaba disclosed that over 800,000 AI agents have been built on the ModelScope platform with continuous upgrades. These specific applications save labor hours, shorten listing cycles, improve CTR/GMV conversion rates, and reduce customer service workload. For international business, Alibaba launched task-specific Accio agents to handle automatic procurement, translation, and compliance matters for cross-border merchants.
**Three-Year 380 Billion Yuan Investment Demonstrates Strategic Commitment**
Alibaba exhibits unwavering investment determination in AI/cloud infrastructure. The company has provided guidance for at least 380 billion yuan (52-53 billion USD) investment over three years, reflecting the capital intensity core to its "full-stack + open" strategy.
In technology stack depth, Alibaba matches hyperscale cloud and databases (IaaS/PaaS) with self-developed inference silicon chips (Hanguang 800 and new inference chip development) and rapidly iterating model layers (Tongyi Qianwen/Tongyi Wanxiang). Regarding openness, Tongyi Qianwen continues open-sourcing in multiple scales while operating one of China's largest model communities (ModelScope/Bailian), converting into genuine developer and enterprise applications.
These factors collectively create a complete funnel from computing to models to applications, forming strong value "capture" points at each layer. JPMorgan believes Alibaba is positioned to disproportionately capture generative AI value in IaaS, PaaS, and applications within the Chinese market.
**Efficiency Dividend Distribution Mechanism Reshapes Business Model**
JPMorgan states that theory and history demonstrate consumers typically receive the largest share of technology-driven efficiency gains through lower prices, richer selections, and better matching, while producers/platforms maintain value through scale, commission rates/pricing power, and new markets.
Within Alibaba's business ecosystem, efficiency dividends from AI technology mean merchants will see operational expense savings and higher conversion rates; consumers will benefit from better recommendations, content, and pricing; Alibaba gains space to reprice services (advertising, tools, agent platforms), particularly in lead generation/traffic quality where value-based pricing can be protected.
JPMorgan expects consumers to remain the largest beneficiaries, but Alibaba can monetize portions of incremental surplus through higher efficiency/advertising ROI and agent workflow subscriptions. This mechanism not only enhances overall platform efficiency but provides Alibaba with sustained revenue growth momentum.
JPMorgan raised Alibaba's US stock and Hong Kong stock price targets from $170/HK$165 to $245/HK$240. Analysts believe that as AI-driven cloud business monetization, merchant cost savings, and domestic e-commerce incremental monetization materialize, Alibaba's equity narrative will return from "domestic e-commerce market share loser" to "China's tier-one internet asset." This positioning change corresponds to 15-20x P/E multiples, significantly higher than current levels.
Due to food delivery and instant retail investments distorting FY2027 financial outlook, JPMorgan recommends investors value Alibaba based on FY2028. According to analyst earnings forecasts, the current stock price corresponds to 12x FY2028 expected P/E ratio, providing substantial room for valuation upgrades.