After blocking Nvidia exports to China, Alibaba develops its own AI chip

Alibaba unveils self-developed AI chip…attempt to replace Nvidia

China's big tech accelerates AI semiconductor competition with government support

MetaX, Cambricon and others release alternative chips and see sharp earnings increases

Chinese big tech firm Alibaba has reportedly developed its own artificial intelligence (AI) semiconductor. After the U.S. government restricted exports of AI chips to China, it appears Alibaba succeeded in developing AI capabilities on its own. Alibaba's stock surged that day while Nvidia's stock fell. Analysts say China's big tech firms are rapidly building in-house tech capabilities with support from the Chinese government to win the AI competition with the U.S.

On the 29th (local time), the Wall Street Journal (WSJ) reported that the new chip developed by Alibaba is more versatile than its existing chips and can be used for a wider range of AI inference tasks. The chip was manufactured by a Chinese semiconductor company. Until now, Alibaba's AI chips were produced at Taiwan's TSMC, the world's largest foundry.

Alibaba has long been one of Nvidia's largest customers, Nvidia being the leading U.S. AI chip maker. The WSJ analyzed that "now Alibaba and other chip designers are filling the gap created as Nvidia products are blocked from sales in China by regulatory barriers."

The semiconductor industry says it will still take time for China to immediately produce chips on par with the most advanced U.S. semiconductor products that the U.S. government has banned from export to China.

Nonetheless, China's big tech companies have been steadily rolling out alternatives to Nvidia semiconductors. In July, President Trump allowed the resumption of exports of Nvidia's H20 to China, but soon after the Chinese government reportedly told companies not to buy the chips for the time being, citing potential security risks.

Shanghai-based MetaX in July unveiled a new chip it said could be an alternative to the H20. The chip has more memory than the H20, improving performance on some AI tasks, but consumes more power. MetaX said on the 27th (local time) it is preparing for mass production of the chip.

Beijing-based AI chip designer Cambricon Technologies posted explosive results in the April-June quarter. Driven by strong orders for its AI chip SiYuan 590, it recorded revenue of $247 million. As the stock rose too quickly, the company warned investors on the 28th (local time) to beware of excessive optimism. On the 29th (local time) the stock fell 6%, but the market capitalization still exceeds $87 billion.

Alibaba said that its cloud revenue in the April-June quarter rose 26%, helped by surging demand for AI services. CEO Eddie Wu said AI and cloud businesses, along with e-commerce, are one of Alibaba's two growth engines. In February, Alibaba also announced it would invest at least $53 billion in the field over the next three years.

Most of Alibaba's previously developed cloud chips were designed for specific applications. The WSJ reported that, quoting people familiar with the matter, "the new chip currently being tested is designed to handle a wider range of AI inference tasks."

New York=Park Shin-young, correspondent nyusos@hankyung.com