Alibaba Shares Surge on Major AI Chip Customer Win

Alibaba (BABA) shares surged on Wednesday following reports in Chinese state media indicating that the e-commerce titan has secured a significant contract with China Unicom for its artificial intelligence (AI) chips. The deal highlights China’s escalating efforts to foster domestic semiconductor growth in the face of escalating geopolitical tensions and evolving export restrictions on advanced AI chips.

According to a report by China’s state broadcaster CCTV, China Unicom, the country’s second-largest telecommunications firm, will deploy Alibaba’s AI accelerators produced by its semiconductor unit, Pingtouge (also known as T-Head). While Alibaba does not directly sell chips, its cloud services allow companies to leverage the computing power these semiconductors provide.

A source familiar with the agreement confirmed the accuracy of the CCTV report to CNBC.

Alibaba shares responded positively to the news, closing more than 5% higher in Hong Kong. The company’s U.S.-listed stock also saw a premarket surge of over 2%.

China Unicom will utilize Alibaba’s computing power as part of a large-scale data center project in China. The project will also incorporate chips from other domestic companies such as MetaX and Biren Technology, showcasing a broader push towards self-reliance in critical technology infrastructure. This development underscores Beijing’s continued strategy to bolster the adoption of domestically produced semiconductors for AI applications, particularly as the availability of Nvidia’s advanced AI chips within China becomes increasingly uncertain due to regulatory hurdles and export controls.

The partnership’s emergence coincides with reports that China’s internet regulator, the Cyberspace Administration of China, has instructed domestic firms to curtail purchases of specific Nvidia AI chips, as reported by the Financial Times. This regulatory pressure further incentivizes the adoption of homegrown solutions. The evolving dynamics in the chip market impacted Nvidia’s stock, with shares declining approximately 1% in premarket trading on Wednesday.

Alibaba is a prominent player in China’s burgeoning AI landscape. In addition to developing its own AI models, the company also operates one of the largest cloud computing platforms in the country. Furthermore, Alibaba is actively developing a new AI chip, as previously reported by CNBC, signifying its commitment to innovation and technological self-sufficiency within the AI domain.

Currently, it remains unclear whether China Unicom’s deployment will involve Alibaba’s latest generation of AI chips. Details regarding the partnership were revealed when CCTV broadcasted a report on China Unicom’s new Sanjiangyuan data center in Qinghai Province, which included a billboard containing information about the collaboration.