Kingsoft Cloud is refashioning itself into an artificial intelligence cloud player — a move that should drive its shares higher, according to Morgan Stanley. The investment bank initiated coverage of Kingsoft Cloud with an overweight rating. It also put a $15 price target on shares, suggesting 64% upside from Monday’s close. “We like Kingsoft Cloud’s early and firm transition from a mid-tier commodity cloud player to AI cloud, with rapidly accelerating AI revenue and improving profitability, anchored by powerful ecosystem support from Xiaomi and Kingsoft Group,” analyst Yang Liu said in a note to clients. “KC’s timely transition and early all-in AI strategy have positioned it well in the AI era among the ten major public cloud players in China.” Kingsoft Cloud has demonstrated strong pricing power amid a global chip shortage that has roiled other AI players, positioning it to continue adding upside to its shares, Liu said. KC YTD mountain KC year to date The company also stands to benefit from its strategic partnerships with several AI giants, including its agreement to provide the core infrastructure to Xiaomi’s AI ecosystem and smart home platforms, according to the bank. On top of that, it has recorded revenue growth from a variety of major customers, which should eventually translate into share gains, Liu added. More broadly, the cloud company has strong cash flow, which should “ease balance sheet constraints,” keeping its stock price elevated, the analyst wrote. Morgan Stanley’s call falls in line with consensus on the Street. All 11 analysts covering Kingsoft have a buy or strong buy on the stock, LSEG data shows. Shares have fallen nearly 12% in the year to date. The stock climbed 3% in the premarket following the bullish call.
