China’s tech giants are racing to plug the gap left by Washington’s export bans, with Alibaba rolling out a new AI processor designed to replace Nvidia’s restricted H20 chip.
The e-commerce titan, now also the country’s largest cloud-computing group, said the chip is more versatile than its predecessors and is aimed squarely at domestic AI developers starved of US technology, according to the Wall Street Journal.
As a result, Beijing has doubled down on its push for self-reliance in semiconductors after Washington barred the sale of Nvidia’s most advanced processors into China.
The move has left local players such as Alibaba and Shanghai-based MetaX scrambling to deliver homegrown alternatives.
MetaX last month claimed its new chip could outperform Nvidia’s H20 in memory-heavy AI tasks, though at the cost of higher power consumption. The firm said it is preparing for mass production.
Nvidia wobbles despite strong results
Alibaba’s move comes just as Nvidia reported another set of record results.
The $4tn (£3.1tn) Silicon Valley behemoth posted fiscal second quarter revenues of $46.7bn, up 56 per cent year-on-year, with profits climbing 59 per cent to $26.4bn.
Yet shares slipped over three per cent in after-hours trading, with investors fretting over China.
Nvidia sold no H20 chips into the country last quarter after new curbs, while guidance for third-quarter revenues of $52.9bn–$55.1bn came in below the bullish estimates that had assumed a China rebound.
Chief executive Jensen Huang admitted the world’s second-largest economy, worth an estimated $50bn in AI spending this year alone, is “effectively closed to us”.
Finance chief Colette Kress also said Nvidia could ship between $2bn and $5bn worth of H20 chips if “several geopolitical issues” were resolved.
In the meantime, Huang has floated the possibility of bringing a modified version of Nvidia’s state-of-the-art Blackwell chip to China, though he warned it would likely need to be “somewhat enhanced in a negative way” to comply with US export rules.
A tale of two AI strategies
For now, the post-match analysis following Thursday’s results shows two very different plays unfolding.
Nvidia remains the unrivalled leader in AI infrastructure, cemented by the runaway success of its Blackwell chips.
However, the Chinese clampdown has given Alibaba and its peers an incentive to scale up their own technology, however far behind the cutting edge they may be.
As Hargreaves Lansdown analyst Matt Britzman noted: “Nvidia’s dominance in AI infrastructure remains unparalleled … Smart investors will look through the noise.”
Yet, officials in Beijing are pushing hard to ensure that homegrown chips, such as those from Alibaba and MetaX, are not just second-best stand-ins, but long-term strategic bets.
Now, the real test will be whether China’s domestic innovation can match the pace of Nvidia’s global rollout, or whether, as Huang argued, the US is inadvertently accelerating its rival’s climb up the tech ladder.