Alibaba's AI Chip Breakthrough Drives 12.9% Stock Surge as $10.85B Volume Ranks Third in Market Activity

Alibaba Group (BABA) surged 12.90% on August 29, 2025, with a trading volume of $10.85 billion, ranking third in market activity. The stock’s rally followed reports of the company’s development of a new AI chip designed to expand its capabilities in AI inference tasks. This chip, currently in testing, is manufactured domestically rather than by TSMC, marking a strategic shift to reduce reliance on foreign semiconductor suppliers. The move aligns with broader Chinese government efforts to build a self-sufficient AI supply chain amid U.S. export restrictions on advanced chips like Nvidia’s H20.

Alibaba’s new chip aims to address a critical gap in China’s AI ecosystem, where access to high-performance hardware has been constrained by geopolitical tensions. Unlike previous iterations, the processor is tailored for AI inference—the application of trained models—rather than training, which still depends on top-tier Nvidia hardware. This development underscores Alibaba’s push to integrate AI infrastructure with its cloud computing services, a sector where it reported a 26% revenue increase in the April-June quarter, driven by strong demand.

The company’s progress in AI chip design positions it as one of only two global entities combining advanced AI chip development with large-scale language model capabilities. This strategic pivot could enhance Alibaba’s competitiveness in cloud services, particularly as Chinese firms increasingly prioritize homegrown technology to mitigate supply chain risks. However, challenges remain, including the limitations of domestic manufacturing and the ongoing reliance on Nvidia for training tasks. Analysts note that while the new chip advances inference capabilities, broader AI model training still hinges on foreign hardware, highlighting the complexity of achieving full self-sufficiency.

Alibaba’s shares closed with a 12.90% gain on August 29, 2025, trading at $10.85 billion in volume, reflecting investor optimism about its AI and cloud initiatives.