Alibaba (NYSE:BABA) has introduced a new cloud-focused AI chip capable of handling a broader range of inference tasks, moving beyond its previous, more specialized processors, the Wall Street Journal reported Friday.
The announcement comes as China accelerates efforts to develop a self-reliant AI supply chain, while U.S. export restrictions continue to limit access to Nvidia’s most advanced chips.
Alibaba’s U.S.-listed shares gained 1.5% in premarket trading.
Once a major buyer of Nvidia (NASDAQ:NVDA) hardware, Alibaba and other Chinese tech companies are increasingly turning to domestically developed chips after Washington curtailed exports. While President Trump temporarily allowed Nvidia to ship its H20 processor, Beijing instructed firms to avoid it over security concerns.
Unlike earlier Alibaba processors produced by Taiwan’s TSMC, the new chip is fabricated domestically in China. It is designed for AI inference—the application of trained models—rather than for training, which still relies on high-end Nvidia systems.
Chinese factories face production constraints due to older equipment and U.S. restrictions on advanced semiconductor tools, limiting output growth, the WSJ cited industry sources.
Other local firms are stepping in to fill the gap. Shanghai startup MetaX released a chip in July intended as an H20 alternative, combining two smaller chips to enhance performance despite using older technology. It offers more memory but higher energy consumption and is moving toward mass production.
The Chinese government supports these initiatives with substantial funding, including an $8.4 billion AI fund announced in January. Huawei has been a key player, showcasing its Ascend chips in systems that some analysts claim outperform Nvidia’s Blackwell setup on certain metrics, albeit with significantly higher power usage.
China’s main limitation remains AI model training, which still depends heavily on Nvidia’s top-tier chips. Alibaba’s new processor targets inference tasks rather than training.
Domestic engineers note that local chips, including Huawei’s, often face challenges in training large AI models, including overheating or failures during processing.
Meanwhile, startup DeepSeek, competing with OpenAI, recently drove a rally in Chinese tech stocks after suggesting on social media that its software advances could leverage improved domestic chips for AI model training.
Alibaba Group Holdings stock price
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