Bank of America: China’s cloud market to reach $1.7 trillion by 2030; reiterates a bullish outlook on Tencent and Alibaba

A recent report from BofA Securities said that the short-term monetization of artificial intelligence (AI) in China will be driven primarily by enterprise demand. Cloud services are the largest and clearest commercialization model, covering AI MaaS, AI computing infrastructure, and non-AI cloud. The report expects that, propelled by enterprise-level AI applications, China’s cloud market will undergo a full-scale boom, with internet cloud giants becoming the main beneficiaries—its top picks being Tencent (00700) and Alibaba (09988).

Cloud market to look toward 1.7 trillion by 2030

BofA expects that, as AI computing demand surges and MaaS becomes more widespread, the size of China’s cloud market will grow from 389 billion yuan in 2025 (renminbi, same below) to 1.73 trillion yuan in 2030, at a 35% CAGR. Among them, AI cloud business is the core engine, expected to grow rapidly at a 66% CAGR, jumping from 66 billion yuan in 2025 to 1.15 trillion yuan in 2030, accounting for 66% of the overall market.

Breaking it down further, driven by tokenized (Token) charging models, the AI MaaS market is expected to surge from 21 billion yuan in 2025 to 676 billion yuan in 2030; AI infrastructure cloud will reach 470 billion yuan. Traditional non-AI cloud will move into a mature phase, with a projected scale of 583 billion yuan in 2030.

Building moats through computing power and ecosystems; cloud giants’ advantages are clear

BofA said explicitly that it “prefers cloud giants over independent AI labs.” The report’s analysis is that, because the gap in domestic AI model capabilities is limited, relying solely on technological advantages makes it difficult to translate into sustained profits. Instead, access to computing power, ecosystem integration, and distribution channels are the core moats—structurally favoring the giants.

Alibaba, Tencent, ByteDance, and others—backed by their scale and customer base—will be the main beneficiaries. The combined capital expenditures of China’s top four giants in 2025 are close to 400 billion yuan, far exceeding the combined total of Zhipu (02513) and MiniMax (00100). Strong cash flow gives the giants an absolute advantage in computing power, enabling them to tolerate lower profits at the model layer in order to drive cross-selling of cloud services.

Independent labs face computing bottlenecks; accelerate expansion overseas

By contrast, independent labs such as Zhipu and MiniMax, although growing faster, face serious computing bottlenecks (especially in inference) and rely more on external financing. When computing power is constrained, they prioritize model training and depend heavily on giant platforms for distribution, leaving them exposed to the risk of being bypassed.

To seek a breakthrough, overseas markets have become the key focus for the expansion of these independent labs. Since early 2026, Zhipu has already had nearly 30% of its AI model revenue come from overseas; BofA also expects MiniMax’s overseas API revenue contribution in the first half of this year to exceed 30%. Although both are expected to achieve their 2026 target of 100 million US dollars ARR, DeepSeek—leveraging strong research capabilities and not putting profits first—is raising industry standards and intensifying competition.

Top picks: Alibaba and Tencent; watch for ecosystem-war catalysts in the second half

On individual stocks, BofA reiterates a “buy” rating on Alibaba, calling it the best representative of China’s “AI/cloud” theme and a direct beneficiary of the tight computing environment. Although the recent share price has reflected concerns about weak retail sentiment, ahead of the September Alibaba Cloud Summit, its risk-reward profile is highly attractive, with a target price of HK$168.

BofA is also bullish on Tencent, giving it a “buy” rating as well, with a target price of HK$780. Its progress in large models and consumer-level intelligent agents is accelerating, and cloud revenue is expected to resume growth in the second half of this year. In addition, ByteDance and telecom operators—backed by aggressive capital expenditures—are also variables that should not be overlooked. As major players roll out model upgrades in the second half of the year (such as ByteDance’s Seed 2.1 and Tencent’s Hunyuan 4.0, etc.), China’s AI ecosystem battle will fully heat up.