Alibaba Jumped 19%!

Will this be another Deepseek?

Author

Pete Tan
September 02, 2025

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Check out the latest from Alibaba.

Source: CNBC

They are testing a new 7nm AI inference chip built in China to cut reliance on Nvidia while keeping compatibility with existing developer tools. That way it still plays nice with the current coding environment and switching over is easy. Their stock jumped close to 20% after the news.

Why This Makes Sense for Alibaba

  1. It fits perfectly with China’s agenda of building self sufficiency in semiconductors, helping companies hedge risks under tightening U.S. export curbs.

  2. The chip is designed for AI inference which powers chatbots and recommendations, not heavy-duty training—so it fits right into Alibaba’s existing cloud operations.

  3. By keeping compatibility with existing tools (such as CUDA), developers do not need to rewrite code which lowers friction

What About DeepSeek Earlier This Year

Remember when DeepSeek dropped its own AI model in January? It caused a wild U.S. market reaction and tech stocks tanked, like billions wiped off Nvidia and others.

But a closer look tells us that the panic might’ve been over the top:

  • AI researchers point out DeepSeek’s efficiency gains were on an expected downward trend, not some mind-blowing leap. “It’s not a leap forward on AI frontier capabilities... the market just got it wrong.”

  • The broader AI sector still holds U.S. advantage in ecosystem, software, infrastructure even if DeepSeek delivered great cost‑performance.

  • Analysts quickly noted that “DeepSeek won’t sink U.S. AI titans.”

So yeah, market overreaction. Dopamine-fueled headlines, but the fundamentals? Still solid for U.S. AI players.

So Is Alibaba’s Chip a US Tech Killer

Not really

Here is why:

  1. Niche Inference Focus: It’s not replacing training GPUs like Nvidia’s Blackwell or H100, so high-end AI developers won't drop U.S. hardware overnight.

  2. Still Early Days: Performance benchmarks haven’t been published, and it seems to be for internal use only so far. No external sales yet.

  3. China Wide Push: This is part of a broader national strategy. Cambricon, Huawei, others are also ramping up domestic AI chips. But they still depend on foundries like SMIC for 7 nm production.

  4. Resilience of U.S. Tech: The U.S. remains dominant in AI infrastructure, research, and chip R&D; Alibaba’s move nudges the needle, but doesn’t tip the scales.

Wrap up

  1. Alibaba’s new AI chip is a smart move and strengthens their cloud business in China, while smartly compatible with Nvidia’s CUDA

  2. It aligns with their national strategy and helps reduce dependence on US chips

  3. But the impact on US tech is far less dramatic than the headlines suggest

  4. We saw the same story with DeepSeek and the hype faded quickly while the fundamentals remained solid

  5. While the impact seems overblown, China’s position and manufacturing ability cannot be ignored.

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The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.