Goldman Sachs has significantly raised its capital expenditure expectations and target price for Alibaba. Analysts indicate that AI capital expenditure conversion is reshaping Alibaba's growth expectations. Despite recent pullbacks due to profit-taking, the company's breakthrough progress in AI cloud computing capabilities and international expansion potential provide new upward momentum for the stock price.

According to reports on October 13th, Goldman Sachs stated that Alibaba's cloud computing business AI revenue has achieved triple-digit growth for eight consecutive quarters, reaching 20% of cloud revenue in the June quarter. Based on full-stack AI capabilities and surging demand for multimodal AI, Goldman Sachs revised upward Alibaba Cloud's external revenue growth rate from the previous expectation of 30%/25%/17% to 33%/29%/19%.

Goldman Sachs dramatically raised Alibaba's three-year capital expenditure forecast to 460 billion yuan, one of Wall Street's most aggressive predictions. Analysts believe this investment level will support Alibaba Cloud's leading position in China's AI cloud market and drive rapid growth in its international business. By fiscal year 2028, international business is expected to contribute one-quarter of Alibaba Cloud's external revenue.

Under the new bull-bear logic, analysts significantly raised Alibaba's 12-month target price for US shares to $205, up approximately 15% from the previous target price of $179.

**AI Capital Expenditure Conversion Framework Reshapes Growth Expectations**

Goldman Sachs introduced an analytical framework for AI capital expenditure to revenue conversion in its report.

Analysts believe that by comparing historical data from Amazon AWS and Google Cloud, Alibaba's development trajectory lags behind US cloud service giants by approximately two years. This time gap aligns with the technological breakthrough timing of ChatGPT (late 2022) and DeepSeek (January 2025).

Goldman Sachs estimates that Alibaba currently has 3-4GW of data center capacity and plans to expand to 20GW by 2032, requiring approximately 2GW of new capacity annually. Based on the estimation that each GW of capacity can support 1 million GPUs, this expansion plan will support large-scale capital investment over the next three years.

Regarding capital expenditure, Goldman Sachs set three scenario assumptions.

In the base case, Alibaba's total capital expenditure for fiscal years 2026-2028 is 460 billion yuan, with a capital expenditure to revenue conversion ratio of 0.2-0.3; in the optimistic scenario, total expenditure could reach 550 billion yuan with a conversion ratio exceeding 0.3; in the pessimistic scenario, expenditure would decrease to 380 billion yuan with a conversion ratio below 0.2.

**Internationalization Strategy Raises Valuation Ceiling**

Alibaba Cloud's international expansion is an important factor in Goldman Sachs' valuation upgrade.

Analysts stated that Alibaba Cloud has established 91 availability zones across 29 regions with 900 overseas nodes. The international business revenue proportion is expected to grow from the current mid-single digits to approximately 25% by fiscal year 2028, with a high double-digit compound annual growth rate.

Analysts emphasized that Alibaba Cloud enjoys pricing premiums in overseas markets, with international pricing for its Qwen model significantly higher than domestic levels. Additionally, Alibaba Cloud is accelerating the construction of its first data centers in Brazil, France, the Netherlands, and other locations, while upgrading existing facilities in five locations including Mexico and Japan, adding 28 AI-specific suites.

In enterprise client development, Alibaba Cloud has secured orders from multinational enterprises such as AstraZeneca. AstraZeneca uses Alibaba Cloud's European nodes to build a drug discovery AI platform, improving efficiency by approximately 300%, providing strong evidence of Alibaba Cloud's international capabilities.

**Rapid Commerce Competition Intensifies Short-term Profitability Pressure**

Despite raising the target price, Goldman Sachs also warned of short-term challenges facing Alibaba.

Analysts expect that due to investments in immediate commerce business (including food delivery), Alibaba's September quarter group EBITA will decline 80% year-over-year. The June quarter immediate commerce business loss was 11 billion yuan, expected to expand to 36 billion yuan in the September quarter.

Goldman Sachs believes competition in immediate commerce business with Meituan will be a key variable. In the long term, market share in food delivery and immediate commerce will form a 5:4:1 pattern among Meituan, Alibaba, and JD.com. Alibaba needs to prove that its immediate commerce investments can generate synergistic effects, particularly driving commercialization monetization rate (CMR) growth through cross-selling.

The report noted that Alibaba management's confidence in CMR growth comes from advertising technology advances and immediate commerce business. Merchant penetration rate for site-wide promotion advertising products has exceeded 30%, while immediate commerce can contribute 2-3 percentage points to CMR in the medium term and 5-10 percentage points in the long term.

Goldman Sachs' reset bull-bear scenario analysis shows that in the optimistic case, Alibaba's target price could reach $280, representing 76% upside from the current stock price; in the pessimistic case, it would be $141, with only 11% downside risk. The 6:1 positive-to-negative return ratio leads analysts to believe the current stock price pullback provides an attractive buying opportunity.