Alibaba Is Firing Back as the US-China AI War Heats Up

China intends to keep up with the Jensen Huangs of the world.

Recent moves out of the country’s tech sector illustrate the country’s ambitions to remain a contender in the race for AI dominance at a time when Nvidia (NVDA), its CEO Huang, and others hope to thwart its advance and battle for a big share of a multibillion-dollar Chinese market for AI technology.

The latest development: Chinese e-commerce juggernaut Alibaba Group Holdings’ (BABA) cloud-computing unit is said to have developed a new chip more advanced than its legacy products, according to a new report from the Wall Street Journal. Other AI challengers are emerging from Shanghai to Beijing.

Alibaba did not respond to Investopedia’s request for comment on the report in time for publication. But investors took note: Its stock, aided by its latest quarterly results, was more than 10% in recent trading Friday. Meanwhile, the PHLX Semiconductor Index (SOX) fell nearly 3%, with Marvell Technology’s (MRVL) double-digit decline dragging on the overall index.

Shares of Nvidia (NVDA), Advanced Micro Devices (AMD), and Taiwan Semiconductor Manufacturing Company (TSM) were also down as of Friday afternoon.

Though the U.S. has blocked China from accessing critical AI tools on national-security grounds and boosted domestic companies, Chinese companies are finding workarounds. China appears intent on eschewing U.S.-made products for its own; Nvidia reportedly suspended production of its H20 chips after Beijing asked local firms to avoid using them due to security concerns.

Jack Ma-founded Alibaba could be a formidable challenger if its AI business grows up to be anything like its online retail business, which in its latest fiscal year generated roughly $81 billion in revenue. CEO Eddie Wu said the firm “has ambitions beyond competing in a single category” and will invest to drive growth in its cloud and AI infrastructure businesses, during its quarterly earnings call, per a transcript made available by AlphaSense.

Alibaba had previously announced plans to spend 380 billion renminbi, or over $50 billion, to drive growth in those businesses over the next three years. The company has also rolled out an AI model it said could outperform models from fellow Chinese challenger DeepSeek, OpenAI, and Meta Platforms (META). Cloud revenue grew 26% in the June-ended quarter.

“Alibaba Group has two historic opportunities to build a technology platform centered on AI plus cloud and to create a comprehensive shopping and daily life services consumption platform,” Wu said Friday.