TMTPOST -- The American depository receipts ( ADRs ) of   Alibaba Group   on Tuesday rose 2.6%, extending   an around 13% rally   for the previous trading session,   their   largest   daily   increase   since 2023   March.   Shares soared   after   the Chinese cloud and e-commerce giant showed   its   artificial intelligence ( AI ) push paid   off   in financia   results, and suggested it ’ s taking actions   to secure   enough   AI chips for sustainable   development.  

Credit：Alibaba

Alibaba, a long-time big   customer of U.S.   AI   chip leader Nvidia   Corporation,   has developed a new AI chip "that is more versatile than its older chips", and the   company and other chip designers could begin "filling the void left after Nvidia ran into regulatory barriers to selling its products in China,"   the Wall Street Journal reported on Friday.

Unlike previous cloud-computing chips   mainly designed for   specific   applications, Alibaba ’ s   new chip, now in testing,   appeared as   a general-purpose one since it   was reported to serve a broader range of AI   interference task. The chip   is designed   for   inference, instead   of training, as China ’ s biggest   weakness   is   training AI models, the report   noted.  

Alibaba ’ s   new chip was also said to be   designed to work with the Nvidia   software ecosystem   so it will be compatible   with   the Nvidia platform   to ease engineers   and developers ’   adoption. The report   suggested   the chip   is   domestically built. That was   an essential step for China toward more localized production,   though   local   players   relying on   Chinese chip factories like   Alibaba   are now   facing the challenge to   get   enough supply   due   to manufacturers ’   difficulties   in increasing capacity.  

Alibaba didn ’ t   respond to the report,   while CNBC   later   echoed,   citing anonymous   sources that   Alibaba   is developing an in-house chip for AI   applications. The   semiconductor is   said to be   specially   designed for   inferencing, which is the actual running of AI applications,   rather than   training   which is when huge amounts of data is used to develop a large model,   but Alibaba will   continue   to use   chips from other vendors   including Nvidia.  

While   China remains   a   laggard on   making the most advanced   semiconductors   comparable   to American competitors, Alibaba ’ s new chip is one of the latest sign   that Chinese companies are   working on alternatives for Nividia ’ s H20,   the   most powerful   AI chip it   is created   to comply with the Biden-era export controls   and allowed   to sell   in   China.  

Chinese upstart   DeepSeek   more than a   week   ago   indicated   China will soon have next-generation   homegrown   chips   to power   its   AI   models.   When releasing its   new reasoning model   V3.1   on August 21, DeepSeek said   its software   innovation--the UE8M0 FP8   precision format   of   the model   is tailored for the next-generation domestically built chips that will be launched soon.   

Nvidia on Friday   posted   mixed   results   for its first fiscal quarter   ended   June   30, 2025, while reaffirming   its   aggressive AI   spending plan   these   years, expressed   confidence   on and recent reports suggested its   development of   AI chip.

Alibaba posted revenue of RMB247.6   billion   ( $34.6   billion )   for the June quarter, less than analysts ’   projection of $35.2   billion polled by FactSet. That represented a 2% year-over-year ( YoY ) increase in sales, cooling from a gain of 7% three months ago.   But the net income    surged 76%   YoY   to RMB42.38   billion   ( $5.9 billion ) , beating the   $3.7 billion   consensus   view.   On Non-GAAP basis, Alibaba earned RMB14.57   ( $2.06 )   diluted earnings per American depositary share ( ADS ) with a 10% YoY decrease, versus analyst expectations of $1.97   per ADS,   representing   a   10%   fall   from a year ago.

Alibaba attributed   the dramatic   YoY surge in net income to gains from equity   investments and the sale   of f local consumer service business of Trendyol,   a Turkish   e-commerce company.

Alibaba ’ s   cloud computing business is   one of highlights   with   the fastest   growth rate   among segments for   the June quarter. Cloud Intelligence Group, which houses Alibaba ’ s AI-related projects and hosts computing power for external clients,   brought RMB33.40   billion with a 26% YoY rise, compared   with a   YoY increase 18%   for the previous quarter.   This momentum was   primarily driven by public cloud revenue growth, including the increasing adoption of AI-related products,   said Alibaba.   It noted   AI-related product revenue maintained triple-digit year-over-year growth for the eighth consecutive quarter.

"This quarter, our strategic focus on consumption and AI + Cloud delivered strong growth. Our decisive   investment in the quick commerce business achieved key milestones as we won consumer mindshare. We   generated substantial synergies from combining resources of our consumer platforms which resulted in new   highs in monthly active consumers and daily order volume,"   said   Alibaba CEO   Eddie   Wu.

Wu vowed   to invest in Alibaba ’ s   two strategic   pillars of consumption and AI + Cloud to "capture historic opportunities and drive long-term growth."    He   on the earnings call   said   Alibaba   in   June   quarter booked RMB 38.6 billion   of capital   expenditure ( CapEx )   investment in AI and cloud infrastructure, and has cumulatively invested   over   RMB100 billion   in AI   infrastructure and AI product research   and development ( R&D )   over the past four   quarters.   

Wu told analysts   Alibaba   would continue to implement   its   three-year   plan to invest   RMB380 billion in   cloud   and   AI.   The commitment   to technology investment unveiled in February reflects the   company ’ s   long-term   ambition to   build infrastructure essential for   AI proliferation.

Wu in the meantime acknowledged   the potential   AI   supply chain   shock   amid trade-war   tensions   between the U.S. and China, and revealed   Alibaba   had its "Plan B". "However, based on the supply chain situation in different quarters, there may be a quarter-to-quarter fluctuation. At the same time, based on changes in policies around AI chips and supply, we have backup plans in place to work with various different partners and to be able to respond to different situations in respect of supply chains,"   said Wu.

Wu stressed his confidence on the CapEx plan. "I ’ m confident that no matter what changes may crop up in the industry we will continue as planned and as expected, to move forward with that planned CapEx investment of RMB 380 billion,"   the chief executive said.