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China’s Alibaba to Invest $28bn in Cloud Services, Stock lifts almost 15% in a Month

Alibaba

Alibaba (NYSE: BABA) said it will invest $28bn into its cloud infrastructure over the next three years as demand for services like live streaming and video conferencing increases. The Chinese e-commerce giant had generated year over year cloud revenue growth of 62% in the latest quarter while working from home policies amid the coronavirus outbreak has raised the demand for its cloud products in the last two months.

The huge investment of $28bn, which is more than the $23bn the company made in revenue over the latest quarter. Alibaba is a leading cloud provider in the Asia Pacific market, according to data body Gartner.

“By increasing our investment on cloud infrastructure and fundamental technologies, we hope to continue providing world-class, trusted computing resources to help businesses speed up the recovery process, and offer cloud-based intelligent solutions to support their digital transformation in the post-pandemic world,” Jeff Zhang, president of Alibaba Cloud Intelligence and chief technology officer of Alibaba Group,  said.

Alibaba holds 46% of the Chinese cloud market share based on research firm Canalys data, well above from Tencent Cloud and Baidu Cloud market share of 18% and 8.8%, respectively. The health emergency has increased the demand for Alibaba’s products like DingTalk, a workplace chat app used by both businesses and schools.

Alibaba stock price has recovered the majority of losses from March low; the stock trades slightly below its 52-weeks high of $231. Whats more bullish indicators are making it one of the favorite stock for day traders.

Broker KeyBanc has provided a price target of $255, implying a significant upside from the current level of $209 a share. Its analyst Hans Chung believes the Chinese e-commerce giant is likely to extend the momentum due to the “strong desire for online sales.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.