Why Is Alibaba’s US-Listed Stock Gaining Today?

Alibaba Group’s (NYSE:BABA) US-listed shares are trading higher in premarket hours following reports that the Chinese e-commerce and cloud computing giant is developing a new, more versatile AI chip to reduce dependence on Nvidia (NASDAQ:NVDA) products.

The development comes as China intensifies efforts to build domestic semiconductor capabilities amid ongoing US export restrictions on advanced AI chips. This move represents a significant step in the escalating technology competition between the US and China, particularly in the crucial artificial intelligence sector.

Alibaba’s AI Chip Development: A Strategic Response to US Restrictions?

According to a Wall Street Journal exclusive report, Alibaba has developed a new AI chip that is more versatile than its previous semiconductor offerings. The chip is currently in the testing phase and is designed to handle a broader range of AI inference tasks, moving beyond the company’s earlier chips that were designed for specific applications.

Notably, the new chip is being manufactured by a Chinese company, contrasting with Alibaba’s previous AI processor that was fabricated by Taiwan Semiconductor Manufacturing Company (NYSE:TSM).

The development comes as Chinese technology companies face increasing pressure from US export restrictions that limit access to advanced American semiconductors. President Trump had allowed Nvidia to resume H20 chip exports to China in July, but Beijing subsequently advised companies not to purchase these chips, citing potential security risks. This has created an opening for domestic Chinese chip developers to fill the void left by restricted Nvidia products.

Alibaba’s new chip will be compatible with Nvidia’s software platform, enabling engineers to repurpose programs they have previously written for Nvidia chips.

This compatibility advantage could make Alibaba’s offering more attractive to developers compared to alternatives like Huawei’s Ascend chips, which require entirely different software ecosystems and have faced resistance from private-sector cloud companies.

Alibaba’s US-Listed Shares Show Premarket Gains

Alibaba’s US-listed shares were trading at $124.10 in premarket hours as of 7:09 AM EDT, representing a 3.80% gain or $4.54 increase from the previous day’s closing price of $119.57. The stock had declined 2.18% during regular trading hours on Thursday following the company’s mixed quarterly earnings results, where it missed both revenue and earnings expectations despite showing growth in its AI and cloud businesses.

The company’s market capitalization stands at approximately $285 billion, with a trailing price-to-earnings ratio of 15.94 and forward P/E of 13.77. Analysts maintain a generally positive outlook on the stock, with an average price target of $152.25, suggesting potential upside of over 27% from current levels. The stock has shown strong performance year-to-date with a 44.53% return, significantly outperforming the Hang Seng Index’s 25.01% gain over the same period.

Recent earnings showed revenue of $247.65 billion with net income of $35.29 billion, while the company continues to invest heavily in AI infrastructure. Alibaba announced plans to invest at least $53 billion over the next three years in AI and cloud services, positioning “AI plus cloud” as one of its two primary growth engines alongside e-commerce. The company also operates Qwen, one of the world’s highest-rated AI models, which could benefit from having dedicated, domestically produced chip infrastructure.

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