Alibaba Develops Advanced AI Chip to Reduce China’s Dependence on Nvidia
By Raffaele Huang and Tracy Qu | August 29, 2025
SINGAPORE — In a bold move to strengthen China’s position in the global artificial intelligence (AI) market, Alibaba, the country’s largest cloud-computing company, has unveiled a next-generation AI chip designed to be more versatile and powerful than its previous models. This development comes amid increasing efforts by Chinese tech firms, supported by strong government backing, to build homegrown AI technologies and reduce reliance on American semiconductor suppliers such as Nvidia.
Filling the Chip Gap
The announcement from Alibaba marks a significant milestone in China’s broader strategy to close the technological gap with the United States in the AI arena. For years, Chinese companies have depended heavily on advanced chips from U.S.-based firms like Nvidia for powerful AI computations crucial to cloud services, machine learning, and other cutting-edge applications.
However, ongoing U.S. export controls and geopolitical tensions have made acquiring such technology more challenging. The Trump administration had temporarily restricted sales of high-end AI chips to China, though some restrictions were recently eased, allowing companies like Nvidia to resume limited sales. Even so, Chinese companies view the need for domestic alternatives as urgent to ensure supply chain security and technological sovereignty.
Alibaba’s New AI Chip
While Alibaba has not disclosed full technical specifications, insiders reveal that the new chip boasts improved flexibility, enabling it to handle a wider variety of AI workloads compared to earlier versions. The company aims to integrate this chip into its cloud-computing infrastructure, thereby enhancing performance and reducing operational costs.
Industry analysts see Alibaba’s chip as a signal that Chinese firms are closing in on the capabilities of market leaders like Nvidia. The move is expected to spark market enthusiasm and encourage further investment in China’s semiconductor sector.
Government Support and Market Implications
China’s government has prioritized AI development as a national strategic goal and is actively supporting domestic companies through funding, policy incentives, and research partnerships. The emergence of locally designed AI chips underlines China’s ambition to lead the global AI race rather than solely follow established players.
"This is part of a broader wave of Chinese innovation in semiconductor technology, aiming to achieve self-reliance amid ongoing geopolitical uncertainties," said a semiconductor expert familiar with the industry.
The development not only has implications for China’s technology ecosystem but could also alter global competition dynamics. As Chinese AI hardware capabilities improve, Western companies may face increased competition in both domestic and international markets.
Looking Ahead
Alibaba’s chip project reflects a growing trend among Chinese technology giants investing in AI hardware. Other local companies also are racing to develop advanced processors to fuel AI applications ranging from cloud computing to autonomous vehicles.
The coming years are likely to witness accelerated development and deployment of indigenous AI technologies in China. Market observers will be watching closely to see how these innovations impact the competitive landscape between Chinese and American tech companies, particularly in the critical area of AI chip production.
About Alibaba
Alibaba Group Holding Limited (NYSE: BABA; HKEX: 9988) is China’s largest cloud computing and e-commerce company, and among the world’s biggest technology conglomerates. Its cloud division powers numerous digital services and is a key player in the country’s AI ambitions.
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