In a research report released on August 21, JPMorgan highlighted that Alibaba Cloud's current operating margin of approximately 12% may not fully capture the earnings potential once AI infrastructure transitions into a mature operational phase. The bank noted that Alibaba has ramped up capital expenditures over recent quarters, with a substantial number of GPU and data center assets only recently becoming operational.

These assets remain in the early stages of utilization ramp-up, with some newly added infrastructure currently running at around 60% capacity. During this initial phase, the return on invested capital for new assets stands at roughly 6% in their first year, significantly below the near-20% level typically seen in a mature operating stage. Using a vintage-based model that segments assets by deployment batch, JPMorgan projects that even if capital expenditure remains relatively stable and unit economics do not improve further, the overall weighted ROIC for Alibaba's AI infrastructure could gradually rise from the current approximate 6% toward 16% as earlier investments mature and utilization rates climb, with potential to approach 20% in the fully mature phase.

Under this scenario, as the efficiency of existing computing assets improves, Alibaba's AI infrastructure is expected to cross its net free cash flow breakeven point around the third year following initial investment. JPMorgan views this as a critical lens for understanding Alibaba's current AI investment cycle: while near-term profitability is constrained by the underutilization of newly added computing assets, the cloud business still holds significant room for margin and capital return expansion as these assets progressively mature.