Overview
Morgan Stanley’s AlphaWise 1H26 China CIO Survey, conducted among 60 chief information officers in March and April, identifies Alibaba as the leading choice to support AI deployment in China. Respondents point to Alibaba’s Qwen model as consolidating its position across critical AI layers - from cloud infrastructure to model offerings and application-level tools.
Survey highlights
The share of CIOs selecting Alibaba as a partner for AI deployment increased to 41% from 32% in the previous survey. Separately, 30% of respondents expect Alibaba to take the largest incremental share of AI spending this year, placing it ahead of peers. ByteDance’s Doubao is cited as a notable challenger, with 27% of CIOs naming it as likely to capture the most incremental AI spend.
Morgan Stanley analysts, led by Yang Liu, summarized the vendor landscape succinctly: "Alibaba is the biggest winner due to its full-stack AI capabilities."
Momentum shifted for some other firms. DeepSeek’s standing in CIO expectations weakened materially - the proportion of respondents who thought DeepSeek would gain the most market share fell to 18% from 33% in the prior survey. Analysts attributed that decline to differences in model performance cadence and marketing profiles, writing: "We think the Qwen series of models' good performance and consistent iteration, as well as ByteDance’s high-profile marketing (vs. DeepSeek acting as a low-profile research house with longer model iteration cycle) are the reasons behind the change."
IT budgets and macro considerations
The vendor competition backdrop comes amid a difficult environment for China’s broader IT market. CIOs revised down their 2026 IT budget growth outlook to 4.8% - the lowest reading since Morgan Stanley began these China CIO surveys in 2020 and a sharp fall from 12.6% reported in the previous survey.
Analysts pointed to several factors that have contributed to CIO caution: geopolitical tensions including the U.S.-Iran conflict that escalated from late February 2026, ongoing deflationary pressures, and the rapid pace of AI technology change. These elements were cited as reasons CIOs are holding back on near-term spending commitments.
AI as top investment priority but rollout delayed
AI remains the top investment priority for CIOs surveyed. The share identifying AI as the area likely to see the largest spending increase rose to 37% from 30% in the prior survey. Respondents also expect the portion of IT budgets allocated to AI to nearly double - rising from 6.1% in 2025 to a projected 12.1% in 2026.
Despite elevated prioritization, the survey finds that many organizations have delayed initial AI projects. Most CIOs - 47% - are now targeting 2027 for the launch of their first projects, reflecting a lag between planning and execution. As the analysts noted: "But the launch of first AI projects has generally been delayed, with most CIOs (47%) eying 2027."
Budget reallocation and spending mix shifts
The survey also indicates AI is beginning to cannibalize existing software budgets. The share of AI funding sourced from current software budgets increased to 22% from 10% in the prior survey, supporting concerns that "AI eats software." At the same time, software’s portion of overall AI spending declined to 40% from about 46-47% in earlier surveys, while hardware’s share rose (no exact hardware percentage was provided).
Public cloud adoption
Looking ahead to cloud infrastructure, CIOs expect adoption of public cloud services to accelerate over the next three years. Alibaba is seen as retaining the leading position in public cloud, with ByteDance and Huawei incrementally gaining ground. More than half of CIOs surveyed anticipate cloud service prices will increase over the next 12 months.
Implications
The survey paints a picture of concentrated vendor leadership in AI technology stacks, heightened emphasis on AI within constrained budgets, and a shifting allocation of IT spend from traditional software to AI and hardware. While Alibaba is perceived as the current frontrunner for AI deployments and incremental spend share, other players such as ByteDance are recognized as serious competitors. At the same time, broader macro and geopolitical headwinds appear to be tempering near-term implementation timelines.