GuShiio.com ① How will Alibaba’s more than 380 billion yuan investment in cloud and AI infrastructure restructure the competitive landscape of China’s data center industry?
② UBS pointed out that the valuation of China IDC operators is underestimated. What expectations does this valuation gap reflect for the market’s IDC industry in China?
Cailian News, March 5 (Editor Hu Jiarong)Responding to the positive impact of the AI and cloud computing industries, Hong Kong stock data center concept stocks collectively strengthened today. As of press time, Wanguo Data-SW (09698.HK) rose more than 13%, and Jinshan Cloud (03896.HK) followed the rise in U.S. stocks.
The momentum for the market’s rise is mainly due to Alibaba Group’s more than 380 billion yuan investment plan in cloud and AI infrastructure, as well as the strong performance of leading data center (IDC) companies.
Yuhang District of Hangzhou City recently launched a survey of Alibaba Cloud and AI ecosystem supporting suppliers, focusing on screening registered local software and hardware service providers. This move echoes Ali’s previously announced largest investment plan in the decade. On February 24, Ali CEO Wu Yongming made it clear that he would invest more than 380 billion yuan to build cloud and AI hardware facilities, far exceeding the total of the past ten years.
As Alibaba’s core IDC service provider, more than 70% of its existing orders come from Alibaba Cloud, directly benefiting from the expansion of the ecological chain. In addition, the company’s fundamentals showed marginal improvement. In the first three quarters of 2024, revenue increased by 13.78% year-on-year to 8.419 billion yuan, and losses narrowed by 32.04%.
Daiwa Securities ‘latest report pointed out that its DeepSeek solution marks the stabilization of its pricing strategy. Service revenue is expected to bottom out and rebound within 1-2 years. Coupled with the potential inclusion of Hong Kong Stock Connect in expectations, the target price will be significantly raised by 95% to HK$39.
Agency says China’s data center operators are underestimated
UBS analyst Wang Xinyi emphasized that the DeepSeek model proved to the industry that training and reasoning costs can be significantly reduced. This will boost AI training and reasoning needs, and third-party IDC operators may have increased demand from ultra-large, retail and wholesale customers.
The bank predicts that the average revenue growth rate of third-party IDC operators will accelerate from high single digits in 2023-24 to 10-20% in 2025-26, which is lower than the previous forecast of industry shelf capacity growth of about 20%, because the proportion of ultra-large projects in the Northwest with lower rents may increase.
They also pointed out that the valuation of China IDC operators based on market expectations is 17 times dynamic EV/EBITDA(near the historical average), which is lower than 24 times that of global peers (1 standard deviation higher than the historical average).
