Alibaba’s latest AI chip has given investors another reason to look past near-term profit pressure.
The Chinese technology giant unveiled the Zhenwu M890 on May 19, a processor it says delivers three times the performance of its predecessor, with 144GB of GPU memory and faster chip-to-chip communication for heavy AI workloads.
Alibaba’s US-listed shares closed up about 1.8% at $135.64 on May 19, while 41 analysts tracked by S&P Global rate the stock a “Strong Buy,” with an average 12-month price target of $190.69, roughly 40% above recent trading levels.
A previous major Zhenwu-related announcement helped send the stock up nearly 8% in one session, underscoring why Wall Street is watching this launch closely.
Alibaba stock: Chip that Wall Street has been waiting for
The M890 matters less as a standalone semiconductor product than as proof of Alibaba’s broader AI strategy.
Its headline specifications include 3x performance, 144GB memory and 800GB/s interchip bandwidth, which are designed for the kind of agentic AI workloads that demand high memory and fast communication across processors.
More importantly for investors, Alibaba is tightening control over the full AI stack: chips through its T-Head unit, cloud infrastructure through Alibaba Cloud and large language models through Qwen.
Morgan Stanley has kept an “Overweight” view on Alibaba, arguing that in-house chip launches reinforce its position across the AI technology stack, while Bank of America has maintained a Buy rating with a $180 target.
That framing turns the M890 from a hardware update into a credibility test for Alibaba’s AI ambitions.
Numbers behind the bull case
The launch also lands on top of a business that is already showing AI-driven acceleration.
In the March quarter, Alibaba’s Cloud Intelligence Group revenue rose 38% year over year to $6.1 billion.
Alibaba said external cloud revenue growth accelerated to 40%, while AI-related product revenue accounted for 30% of external cloud revenue and posted triple-digit growth for the 11th consecutive quarter.
CEO Eddie Wu told investors that Alibaba’s AI had “moved beyond the initial investment phase” and progressed toward commercialization at scale.
The company has also said its Qwen app has reached 300 million monthly users, while more than 560,000 Zhenwu units have already been delivered to customers.
In that context, the M890 looks less like a speculative moonshot and more like the next marker in a commercial AI roadmap already gaining traction.
Bears still have a case
The bull case comes with a clear cost. Alibaba reported an operating loss of $125 million, in the March quarter, compared with a large operating profit a year earlier.
Capital expenditures rose to 26.89 billion yuan, and profitability has been squeezed by spending on AI infrastructure and quick commerce.
The adjusted earnings per ADS fell sharply even as the stock rallied on AI optimism.
Analysts broadly expect profit growth to remain under pressure through 2026, with a more meaningful rebound pencilled in for 2027 if cloud monetization improves and spending becomes more efficient.
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