Eben@CANSLIM ResearchBernstein has reiterated an Outperform rating on Alibaba Group Holding Ltd (BABA) with a price target of US$165 per ADS and HK$161 for the Hong Kong-listed 9988.HK line, implying 48% upside from the US$111.81 close on 3 September 2026. In a report titled “Alibaba: Bottom-up modelling of AI capex payback, funding needs”, analysts Robin Zhu, Qingyuan Lin, Charles Gou and Min-Joo Kang argue that a bottom-up build of Alibaba’s datacentre unit economics largely validates management’s claims of a 2.5-3 year payback on AI capex. The note nonetheless flags a c. RMB170bn funding gap against close to RMB1tn of cumulative AI capex needed to reach US$100bn of external cloud revenue by FY3/31, roughly half of which was addressed by last month’s US$10.2bn equity raise.
Key Takeaways
- Bernstein rates Alibaba Group Holding Ltd (BABA) Outperform with a US$165 price target (cut from US$180) and HK$161 for 9988.HK (cut from HK$176), against a 3 September 2026 close of US$111.81.
- Bernstein’s bottom-up datacentre model implies a 3.02-year payback on capex spent on the existing Zhenwu 810E chip and a 2.52-year payback on the new M890 chipset, broadly consistent with Alibaba management’s 2.5-3 year breakeven guidance.
- Alibaba’s US$10.2bn equity raise in August 2026 drew investor criticism because the company held US$30.7bn of net cash as of 30 June, which Bernstein says diluted the credibility of management’s ROI messaging.
- Bernstein estimates Alibaba needs close to RMB1tn of cumulative AI capex to exceed US$100bn in external cloud revenue by FY3/31, leaving a c. RMB170bn funding gap that the equity raise roughly halved.
- Bernstein forecasts Alibaba adjusted EPS of CNY44.78 in F27E and CNY64.65 in F28E, with the adjusted P/E compressing from 28.0x in F26A to 16.8x and 11.6x respectively.
What Bernstein’s Alibaba Note Says About AI Capex Payback
In a report titled “Alibaba: Bottom-up modelling of AI capex payback, funding needs”, Bernstein’s Robin Zhu and co-authors write that Alibaba Group Holding Ltd (BABA) shares fell sharply after the company’s US$10.2bn equity raise and have traded indifferently since. The analysts acknowledge investor frustration: several shareholders argued that management talking up capex ROI, followed by news of a deal driving a Friday ADR decline and a weekend deal announcement — while Alibaba held US$30.7bn of net cash — diluted the credibility of management’s return claims. One investor invoked the scorpion-and-frog parable, also referencing the company’s May 2024 convertible bond raise.
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