Real Madrid star Morata has been heavily linked with a move to the Premier League this summer.
Manchester United initially appeared set to win the race for his signature, with Jose Mourinho keen on securing a reunion with a player who he gave his league debut back to back in December 2010.
However, their capture of Romelu Lukaku – coupled with Real's reluctance to let him go to Old Trafford – meant the deal was called off.
Chelsea have since been heavily linked with him, with the Blues needing to replace Diego Costa who is set to rejoin Atletico Madrid.
Alvaro Morata's next club: Where could the Real Madrid ace go next? Wed, July 12, 2017
Where is Alvaro Morata tipped to go next? (Odds provided by Paddy Power)
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Where could Alvaro Morata go next? Odds provided by Paddy Power
Yet BBC journalist Carlo Laudisa says Morata is now primed to join Serie A giants AC Milan instead.
"Overtaken in the hunt for the striker. #Milan a step from #Morata: 70 mln at #Real, 10 net to him. Pass #Belots and #Aubameyang," he said on Twitter.
Both Torino striker Andrea Belotti and Borussia Dortmund star Pierre-Emerick Aubameyang have also been linked with Milan.
But Chelsea could now have to settle for one of the two with Morata now likely to be plying his trade at the San Siro next season.
Chelsea look set to miss out to AC Milan in their chase of Alvaro Morata
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Real Madrid star Alvaro Morata dyed his hair red as he thought he would join Manchester United
Should the deal go through, the Spain international will become Milan's latest signing.
Funded by cash from a Chinese consortium, Vincenzo Montella's side have already embarked on a summer spending spree.
They successfully snared Leonardo Bonucci from Juventus and have also managed to sign the likes of Lucas Biglia, Andre Silva and Ricardo Rodriguez.