By Adam Clark
Chinese artificial-intelligence software has been boosting stocks such as Alibaba. Now, the e-commerce company could make further gains as it produces its own semiconductors.
Alibaba has been participating in a fierce race with local peers DeepSeek, Baidu and Tencent to release more powerful AI models. Excitement about the race has lifted stocks across the Chinese technology sector. Alibaba's American depositary receipts have risen 59% this year through to Friday's close.
One concern has been how far those AI developers can take their models using U.S.-designed chips from the likes of Nvidia, given restrictions by Washington on what semiconductors can be sold to China. Even exports to China of Nvidia's currently permitted H20 chip, which is far behind its current-generation Blackwell semiconductors in computing capacity, might be banned, according to recent reports.
That has left Chinese companies looking to local alternatives. The financial-technology company Ant Group, which is affiliated with Alibaba, has apparently made a breakthrough.
Ant used chips from Alibaba and Huawei Technologies to train an AI model, and obtained comparable performance to what it could have gotten using Nvidia's H800 chip, which isn't permitted to be exported to China, according to a Bloomberg report on Monday. The report, which cited people familiar with the matter, said the cost saving could be 20%.
Ant didn't immediately respond to a request for comment on the report.
The reported use of Alibaba's own chips is a notable development because discussion of Chinese alternatives to Nvidia have generally revolved around Huawei's Ascend AI hardware. Alibaba said recently that it would invest at least 380 billion yuan ($52.4 billion) in cloud computing and AI over the next three years.
Alibaba's ADRs were up 1.1% in premarket trading on Monday.
Demand for Chinese-made semiconductors could rise quickly as further U.S. restrictions come into place. Analysts at Jefferies forecast China will be able to secure around 600,000 Nvidia H20 chips this year, potentially falling to 300,000 in 2026. Meanwhile, they forecast China's production of graphics-processing units will rise sixfold from 2024 through to 2030.
Alibaba was a Barron's stock pick for 2025. We noted the potential for its low valuation to increase if investors warmed to the Chinese market.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2025 09:33 ET (13:33 GMT)
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