Goldman Sachs Shifts Chinese Internet Preferences Toward Cloud and Data Infrastructure
Goldman Sachs has overhauled its view on Chinese internet stocks ahead of the second half of 2026, pivoting toward cloud and data infrastructure while acknowledging pockets of value in e-commerce. In a closed-door research note, the investment bank ranked sub-sectors in a new order: cloud and data infrastructure first, followed by games and entertainment, with e-commerce and mobility relegated to third place. The redrawing reflects a conviction that earnings revision cycles for several names are near a trough, which could pave the way for a share price rebound.
The call comes against a backdrop of gradually stabilising consumer trends in China, albeit with persistent macroeconomic caution. Goldman analysts argue that selected companies are poised to deliver a recovery in both revenue growth and profitability over the next six months, providing catalysts that outweigh the still-soft consumption backdrop.
Concretely, the bank kept Alibaba Group on its Asia-Pacific Conviction List, calling it the top pick in the cloud and data centre segment. JD.com was brought into the bank's formal coverage of the internet sector for the first time, with the note pointing to an expected improvement in top-line momentum and margins in the second half. The firm did not publicly name the third stock in its top-three favourites list, leaving market watchers to speculate.
Why Alibaba's Cloud Strength and JD.com's Recovery Potential Caught Goldman's Eye
Goldman's Sector Hierarchy: Cloud Takes the Lead
The promotion of cloud infrastructure to the top spot is no accident. Alibaba's Cloud Intelligence Group posted a 38% year-on-year revenue jump in the March 2026 quarter, reaching approximately $6 billion, and external customer revenue grew even faster at 40%. Crucially, AI-related products accounted for 30% of those external sales. Goldman appears to be betting that this enterprise-oriented, recurring-revenue stream is less tethered to discretionary consumer spending than e-commerce, giving it a defensive quality that the Chinese internet sector has often lacked.
By contrast, the downgrade of e-commerce and mobility — which includes giants like Meituan and Pinduoduo, though they were not mentioned by name — suggests the bank still sees headwinds from a hesitant consumer. Yet Goldman's willingness to single out JD.com within that unloved space indicates a stock-specific story: a trader perceived as better positioned on cost discipline, logistics integration or market share resilience. The note did not disclose the precise catalysts, but the inclusion alone is a signal that selective upside exists even in the less-favoured bucket.
The omission of a third name from the published excerpts raises the question whether the bank highlighted a gaming or entertainment play such as Tencent or NetEase. While speculation cannot elevate that to fact, the ranking's second-placed category — games and entertainment — reflects a view that digital leisure spending is holding up better than physical goods and travel bookings.
What the Goldman Call Means for Investors in Chinese Internet
For international investors tracking Chinese internet exposure, the Goldman ranking provides a clear, though partial, map of relative preference:
- Alibaba's cloud business is the centrepiece. With cloud revenue growing at nearly 40%, the unit's scale and AI product traction represent a distinct value driver that Goldman expects to attract a premium. Investors may wish to scrutinise whether their current models adequately separate the cloud segment from the legacy commerce business.
- JD.com's entry into Goldman's coverage is a recovery bet. The bank's explicit reference to expected improvements in revenue growth and profitability in the second half implies that first-half numbers have been weak enough to invite a turnaround narrative. The stock's performance around the upcoming semi-annual results will test that thesis.
- Watch for the missing third pick. If Goldman eventually names a gaming or entertainment leader — the second-placed category — it would reinforce a strategy of tilting toward digital services that are less exposed to physical consumption. For now, the omission keeps a cloud-gaming barbell intact, with Alibaba and JD.com as the known anchors.
Risk & Opportunity Assessment
| Commercial Risk | Medium | Chinese consumer sentiment remains muted and the broader macro environment is weak, as Goldman's own e-commerce downgrade acknowledges; this could delay earnings recovery for JD.com and other consumer-exposed names. |
| Competitive Risk | High | E-commerce and cloud are fiercely contested in China — Alibaba faces Pinduoduo, JD.com and ByteDance in commerce, and cloud rivals include Huawei and AWS; Goldman's preference does not eliminate that rivalry. |
| Regulatory Risk | Low | No new regulatory threats are mentioned in the note, and the tech crackdown cycle appears to have stabilised. |
| Reputation Risk | Low | No reputational issues are flagged for either Alibaba or JD.com in the source article; the focus is on financial performance. |
| Technology Disruption | Medium | AI is a tailwind for Alibaba's cloud, but also a threat if competitors leapfrog with more advanced or cheaper infrastructure; the same AI wave could disrupt traditional e-commerce search and logistics models. |
| Commercial Opportunity | High | Goldman's top pick status and the conviction-list inclusion suggest the bank sees a material chance of share price gains as earnings revision cycles bottom; the 38-40% cloud revenue growth at Alibaba and JD.com's profit-recovery story underpin this. |
Comments 0