Furthermore, reports have emerged that Alibaba has created a new AI chip for its cloud computing division. While the new chip is not intended to compete with Nvidia (NASDAQ:NVDA) Hopper series of chips, much less the new Blackwell lineup, that’s not the actual goal. The focus is on ensuring Alibaba can secure a supply of AI semiconductors despite U.S. export restrictions while also enhancing the competitiveness of its cloud business as AI adoption continues to rise.

This development also takes place against a backdrop of geopolitical tension. The U.S. has prohibited leading-edge chip exports to China, with Nvidia’s H20 being restricted earlier this year. Though shipments have since been conditionally permitted, Chinese companies still face uncertainty, and reports suggest that Beijing has advised companies to refrain from relying on the H20. By creating its own chip, Alibaba can diminish its reliance on U.S. suppliers while meeting China’s rapidly increasing need for AI capabilities.

In summary, the new chips are likely to supplement Nvidia’s GPUs in Alibaba’s broader AI strategy. The company will probably continue to depend on Nvidia hardware for training AI models in the short term, while its own chips focus on powering cloud-based inference on a large scale. Other Chinese companies are also intensifying efforts in developing AI chips. Baidu, Huawei, and startups such as Cambricon are all working on AI semiconductors. However, Alibaba’s established presence in cloud computing gives it a distribution advantage. It can swiftly integrate new chips into its extensive data centers and monetize them through its existing customer base.^[1]