Alibaba Accelerates AI Competition With Possible Massive Nvidia Purchase

Alibaba Shares Climb on Prospects of Expanded Nvidia Chip Access in China

Alibaba Group Holding Ltd. (NYSE: BABA) saw its stock price rise on Thursday following news that Chinese companies may soon gain broader access to advanced artificial intelligence chips from Nvidia Corp. (NASDAQ: NVDA).

Although Alibaba gave back some of those gains in early Friday trading, the previous session saw the stock surge over 5%. The rally was fueled by reports suggesting that China could soon authorize limited imports of Nvidia's H200 AI chips, possibly within this quarter.

Nvidia is currently restricting sales of its H200 chips to China as it attempts to reestablish its presence in the region while navigating ongoing political tensions between the United States and China. According to Reuters, Nvidia now requires Chinese buyers to pay the full amount upfront and agree to strict, non-negotiable contract terms for H200 chip orders.

Beijing's Regulatory Developments

Bloomberg reports that Chinese authorities are preparing to permit restricted imports of the H200 chip for specific commercial applications, while continuing to block access for the military, sensitive government departments, and state-owned enterprises.

Officials have also instructed some Chinese tech companies to temporarily halt new orders and are considering regulations that would require buyers to purchase locally produced chips alongside Nvidia products.

Amid these developments, Alibaba has privately informed Nvidia of its interest in acquiring over 200,000 units of the H200 chip, according to a Bloomberg source familiar with the situation.

Expert Insights

Market participants responded positively to expectations that Chinese firms will be allowed to utilize Nvidia's H200 chips, a move that would benefit companies like Alibaba, said Vey-Sern Ling, managing director at Union Bancaire Privee, in comments to Bloomberg.

The H200 is an earlier-generation chip that the U.S. government has permitted for export to China, despite ongoing geopolitical strains.

Alibaba stands out as the leading investor in artificial intelligence among Chinese tech firms, and a more stable chip supply would further bolster its cloud computing operations.

Over the past year, Alibaba's stock has soared by 92%, reflecting strong investor optimism in its significant AI investments and the rapid expansion of its cloud business.

Recent Stock Performance: As of Friday's premarket session, Alibaba shares had declined by 2.51% to $150.59, according to Benzinga Pro.

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