Alibaba stock upgraded due to AI optimism

On February 26, 2025, Bernstein made headlines after it upgraded Alibaba's stock rating from market perform to outperform. This change was driven by growing optimism around artificial intelligence and its expected impact on the company's financial performance. Bernstein raised its price target for Alibaba shares by $61 to a new target of $165, indicating a potential upside of 23.1% compared to the stock's close the day before. The upgrade comes amid a significant increase in Alibaba's stock value, which has risen over 50% within the last month. This surge follows competitive pressures created by the low-cost AI model introduced by Chinese startup DeepSeek, which has raised concerns about competition and spending among major U.S. tech companies. The company also reported strong fourth-quarter results that provided additional momentum for the stock, as shares climbed more than 4% in response to the announcement of its video generation AI models being made open-source, a similar strategy adopted by DeepSeek. Analyst Robin Zhu expressed confidence that positive sentiment surrounding artificial intelligence would continue to translate into robust growth for Alibaba. He highlighted that the company's capital allocation strategies and overall industry improvements bolster its earnings prospects moving forward. The outlook includes expectations of significant revenue acceleration for AliCloud, Alibaba's cloud computing unit, in the coming quarters. This optimistic assessment by Bernstein aligns with the majority sentiment on Wall Street, where 39 out of 44 analysts have rated Alibaba's stock as a strong buy or buy, with a consensus target price of $150, which implies a 12.1% upside from the recent closure.