As enterprise-level application demand explodes, the investment narrative for China's AI infrastructure is being reignited.

Goldman Sachs noted in a recent report that full-stack cloud vendors represented by Alibaba are embracing new growth opportunities, benefiting from enterprises' accelerated adoption of large models and sustained robust computing demand.

Data shows that AI's actual deployment and application in the commercial sector is significantly accelerating. Daily token consumption of China's enterprise-level large models reached 10.2 trillion in the first half of 2025, a dramatic 363% surge compared to the second half of 2024.

Goldman Sachs believes Alibaba is well-positioned with its leading model capabilities, 47% share of China's public cloud market, and diversified chip supply, while also having room for international expansion.

Based on optimistic industry outlook, Goldman Sachs raised Alibaba's target price from $163 to $179, maintaining a "Buy" rating. Goldman Sachs specifically increased its valuation of Alibaba Cloud from $36 per ADS to $43, and raised growth expectations for Alibaba Cloud in Q2-Q4 of fiscal year 2026.

Goldman Sachs analysts Ronald Keung and others emphasized that Chinese cloud vendors are making progress in self-developed inference chips and adopting a "multi-chip strategy," meaning China's AI cloud industry growth "is no longer solely dependent on overseas chip supply." This shift, combined with strong capital expenditure prospects, brings compound growth potential to the industry.

**Enterprise Adoption Rate Soars, Token Consumption Surges**

Chinese enterprises are embracing generative AI at unprecedented speed, which is the core driving force supporting the infrastructure narrative. According to Frost & Sullivan data, daily total token consumption of China's enterprise-level large models reached 10.2 trillion in the first half of 2025, a sequential surge of 363%.

Among numerous model providers, Alibaba, ByteDance, and DeepSeek have become the top three popular choices for Chinese enterprises selecting general-purpose large models.

Goldman Sachs cited Omdia's report indicating that Alibaba has successfully penetrated most Chinese Fortune 500 companies deploying generative AI in 2025, occupying the leading position in this market segment. This business model of charging through API calls and token usage puts large cloud service providers with leading AI models and agent capabilities in the most advantageous position.

**Infrastructure Narrative Reignites, Multi-Chip Strategy Breaks Through Bottlenecks**

Goldman Sachs believes China's AI infrastructure investment narrative was reignited after Alibaba announced better-than-expected cloud business revenue and capital expenditure. The firm predicts that capital expenditure by Chinese cloud service providers (CSPs) will grow 39% year-over-year in Q3 2025, providing hardware foundation for sustained AI cloud revenue growth.

Meanwhile, the evolution of chip supply landscape has also enhanced market confidence. Goldman Sachs believes this diversified chip supply strategy is reshaping the development prospects of China's AI cloud industry.

Based on these positive trends, Goldman Sachs reiterated its "Buy" rating on Alibaba and raised its 12-month SOTP (Sum-of-the-Parts) target price to $179. Goldman Sachs raised Alibaba Cloud's growth expectations for Q2-Q4 of fiscal year 2026 from 28%-30% to 30%-32%, reflecting its latest AI full-stack products, robust computing demand, and capital expenditure prospects.

The report compares China's current market stage to the U.S. market two years ago (when ChatGPT was launched at the end of 2022), when the market rewarded companies that proposed "build the infrastructure and customers will come" and increased capital expenditure.

Goldman Sachs analysts believe Alibaba is well-positioned with its leading model capabilities, 47% share of China's public cloud market (according to IDC report), and diversified chip supply, while having room for international expansion. Investors are closely watching the upcoming Apsara Conference in Hangzhou, expecting more updates on Alibaba Cloud and Alibaba's AI progress.

**Tech Giants Launch Arms Race, but Commercial Monetization Still Has Long Way to Go**

Beyond the infrastructure layer, China's AI model and application layers are also developing rapidly. The report lists several key developments:

**Alibaba:** Released the new-generation model architecture Qwen3-Next on September 12, reportedly delivering 10 times the performance of previous models while requiring only 1/10 the construction cost. The Qwen3-Next-80B-A3B model with 80 billion parameters runs 10 times faster than the 32B model released in April.

**Baidu:** Released ERNIE X1.1 on September 9, showing significant improvements in authenticity, instruction following, and agent capabilities, with performance comparable to GPT-5 and Gemini 2.5 Pro.

**Tencent:** Released the leading 3D world generation model HunyuanWorld-Voyager and high-resolution text-to-image model HunyuanImage 2.1.

Meanwhile, AI is beginning to be embedded in mainstream applications as "agents." For example, Meituan launched AI assistant "Xiaomei" based on its self-developed large model, supporting voice ordering and restaurant reservations; Alibaba's Amap launched AI-native guide "Teacher Xiaogao," aiming to transform map services into personalized travel life companions.

Goldman Sachs stated that in multimodal areas such as text-to-video and text-to-image, Chinese models are rapidly narrowing the gap with global peers. However, in terms of commercial monetization, Chinese AI applications still have a long way to go.

As of August 2025, the total annual recurring revenue (ARR) of global AI applications was approximately $30 billion, while Chinese AI applications' ARR was only $1.5 billion, accounting for 5% of the global share.