Chinese e-commerce giant Alibaba may very well be replacing Nvidia when it comes to AI chips in China. The Wall Street Journal reported on Friday, citing people familiar with the matter that Alibaba has developed a new chip that is more versatile than its older chips and is meant to serve a broader range of AI inference tasks.
Alibaba’s latest chip is reportedly aimed at competing with Nvidia’s H2O, a product barred from sale in China over U.S. security restrictions that Nvidia disputes. While Chinese chips have yet to match Nvidia’s performance, the company’s absence from the market weighed on its shares this week.
READ: Nvidia, AMD agree to 15% revenue share in US-China deal (
The chip, now in testing, is manufactured by a Chinese company, in contrast to an earlier Alibaba AI processor that was fabricated by Taiwan Semiconductor Manufacturing, the report said.
Alibaba’s decision to develop and manufacture its own AI chips is primarily driven by the need to reduce reliance on foreign suppliers amid escalating geopolitical tensions. With the U.S. imposing stricter export controls on advanced semiconductor technologies, Chinese companies like Alibaba face growing challenges accessing cutting-edge chips and manufacturing processes. By creating domestically produced AI chips, Alibaba aims to secure its supply chain, avoid potential disruptions, and maintain its competitive edge in cloud computing and AI services.
READ: China warns firms against using Nvidia chips, citing security concerns (
CNBC also reported that Alibaba said it would invest at least over $50 billion or 380 billion Chinese yuan in AI over the next three years.
This initiative also aligns with China’s national strategy to achieve semiconductor self-sufficiency. The Chinese government has prioritized building a homegrown semiconductor ecosystem to lessen dependence on foreign technology amid ongoing trade conflicts and sanctions.
For Nvidia, Alibaba’s push represents a significant challenge in China’s AI chip market. Nvidia has long dominated this space, supplying most of China’s AI hardware. However, with Alibaba and other Chinese firms ramping up their own chip production, Nvidia’s market share could face pressure, especially as U.S. export restrictions tighten.