TLDR
- Alibaba stock price rallied on strong Q1 cloud revenue growth of 26% and AI chip development rumors
- Multiple analysts raised BABA stock price targets, with Citi boosting to $187 and BofA to $152
- Net income per share jumped 76% to $5.9 billion despite modest 2% revenue growth
- Political risks and ADR structure continue to concern investors about Chinese stocks
- Alibaba-backed robotics firm Quicktron plans $100 million Hong Kong IPO next year
Alibaba Group stock gained momentum this week following strong quarterly earnings and reports of AI chip development. The Chinese e-commerce giant’s stock price surged over 3% in overnight trading after Hong Kong shares jumped 18.5% Monday.
BABA stock has climbed 62% year-to-date as investors focus on the company’s cloud computing growth. The Cloud Intelligence unit posted 26% revenue growth in Q1, offsetting concerns about slower overall expansion.
Revenue rose just 2% year-over-year to $34.57 billion for the June quarter. However, net income per share jumped 76% to $5.9 billion, demonstrating improved profitability across business segments.
Wall Street Analysts Raise BABA Stock Price Targets
Multiple analysts boosted their Alibaba stock price targets following the earnings report. Citi raised its target to $187 from $148 while maintaining a Buy rating, citing strong cloud revenue growth.
BofA Securities increased its price target to $152 from $135, praising the company’s cloud performance. UBS lifted its target to $162 from $158, noting management addressed key investor concerns about AI investments.
Bernstein analyst Robin Zhu raised the price target to $160 from $145 with an Outperform rating. The average analyst price target now stands at $160.43, implying 19% upside potential from current levels.
AI Chip Development Could Reduce U.S. Dependence
CNBC reported that Alibaba is developing an artificial intelligence chip designed for inference applications. Two sources familiar with the matter confirmed the AI chip project focuses on inference rather than training large language models.
The rumored development comes as U.S. export restrictions limit Chinese access to advanced computing chips. Alibaba’s AI chip could help reduce dependence on U.S. semiconductor technology for its cloud services.
Retail investor sentiment on Stocktwits reached “extremely bullish” levels with 360% higher message volume. Some investors expect BABA stock to reach $150 this week and potentially $200 by weekend.
Chinese Stock Risks Remain Key Concern
Political risks continue to weigh on Chinese stocks despite strong fundamentals. American investors must purchase ADRs rather than direct ownership, adding regulatory complexity to positions.
The SEC previously threatened to delist Chinese companies over transparency issues. While agreements were reached, these concerns have resurfaced recently as U.S.-China relations remain tense.
Charlie Munger, Warren Buffett’s former business partner, quickly sold his Alibaba position in 2021 after initially investing. He cited regulatory risks and government reactions to company leadership as key concerns.
Separately, Alibaba-backed Quicktron Robotics plans a Hong Kong IPO to raise at least $100 million next year. The robotics company manufactures warehouse automation equipment and self-driving forklifts.
