The world wasn’t going to let Nvidia dominate the global market forever.
There’s no denying Nvidia (NVDA -4.84%) has earned its place as the world’s biggest publicly traded company. Its technology is the heart and soul of most of the planet’s artificial intelligence (AI) platforms, and AI itself is working to become one of the most revolutionary inventions of all time. That’s why so many companies here and abroad continue buying as many of Nvidia’s accelerators as Nvidia can sell them.
As could have been predicted, though, the company’s near monopoly of the AI hardware market wasn’t going to remain unchecked forever. Competitors like Intel and Advanced Micro Devices want to capitalize on the opportunity as well, while governments grow leery of their businesses becoming too dependent on a single supplier of any crucial technology.
That’s certainly been the case in China, anyway. While Beijing was tolerant of the use of American-made AI processors when the industry was in its infancy, trade tensions and national security concerns soon prompted a homegrown response. No surprises there.
What’s surprising is the organization leading China’s AI hardware development effort. That’s Alibaba Group (BABA -8.60%). Yes, China’s e-commerce giant. Even more surprising is that the e-commerce powerhouse is doing a great job on the AI development front. It may even become the Nvidia of China.
And if that’s what’s in the cards, investors have much to gain.
Image source: Getty Images.
Alibaba is leading China’s AI charge
The bulk of Alibaba’s revenue still comes from e-commerce. More than half of its Q2 2025 sales came from domestic e-commerce operations, while another 15% was driven by its international e-commerce efforts.
Alibaba is more than e-commerce, though. While still relatively small, the company’s cloud computing arm — which includes its nascent AI business — accounts for another 15% of its total sales, and it was the second quarter’s fastest-growing arm with a year-over-year improvement of 26%. If it continues expanding at its current pace, it could eventually become the company’s biggest business.
This is possible, too, and even likely, given how far along the company now is on this front.
While Alibaba’s been working on its T-Head parallel processing unit for a while now, the version of the processor chip unveiled last month is noteworthy. Namely, it almost perfectly matches the performance specs of Nvidia’s flagship H20 GPU meant for export to overseas users. In theory, there is no reason for a Chinese firm to choose the H20 over Alibaba’s silicon, particularly given that the latter costs about 40% less.
It’s not just hardware, though. The software Alibaba is typically pairing with its AI solutions is at least as marketable as Nvidia’s CUDA ecosystem, if not more so. That’s because Alibaba is largely building its AI platforms in a way that makes it easy to use open-source software, which tends to be more flexible than closed-off systems like Nvidia’s CUDA.
The company has also made clear to all potential customers that its cloud solutions and artificial intelligence solutions are meant to be purchased in tandem, with many of its tools being aimed at its existing cloud customers.
And given the opportunity that Alibaba has just within its home country and its near neighbors, don’t be surprised if the company makes an Nvidia-size splash there.
Opportunity awaits
A recent analysis done by JPMorgan speaks volumes. As its researchers bluntly noted in response to China’s recent AI development work, “A sleeping giant awakens.” Quantifying the comment, JPMorgan’s analysts believe China’s AI industry could be worth $1.4 trillion by 2030, translating into a 52% return on investments made in this tech in the meantime.
This technology will, of course, be sold as a service outside China, but it will also be used within its borders to improve the nation’s own business efficiency. Goldman Sachs expects that whatever gross domestic product (GDP) growth rate the nation was going to experience through 2030 will now be improved by 20 to 30 basis points thanks to China’s growing adoption of AI.
Alibaba’s processors won’t be responsible for all of this expansion. Baidu (BIDU -8.09%) is working on its own AI processors, as is Huawei. Baidu’s Kunlun processor was technically China’s first domestically made AI silicon, in fact.
It’s not quite a direct threat to Alibaba’s eventual dominance, though. Baidu’s Kunlun is a cloud-to-edge AI chip largely meant for the mobile market. It doesn’t have the same sort of raw computing power of Alibaba’s T-Head, which is expected to be able to handle heavier-duty inference work like figuring out how respond to a new query when there’s no specific data or clear history to draw on. China’s state-owned telecom outfit, China Unicom, already ordered a bunch of Alibaba’s T-Head processors for a new data center in Qinghai, in fact, even before these chips officially entered mass production.
And this may be just a taste of the demand that awaits. Again, JPMorgan expects China’s AI market to grow to $1.4 trillion by 2030, while the country’s total GDP is a little less than $20 trillion right now.
It’s no Nvidia, but it’s still a buy, or will be soon enough
Will Alibaba replicate all the success that Nvidia has dished out over the course of the past three years, after the launch of ChatGPT set off an AI arms race? For that matter, will Alibaba stock reproduce the 1,400% gain that Nvidia’s stock has made during this stretch?
The answer to both questions is probably not.
Don’t lose perspective on the comparison, though. Nvidia was in the right place at the perfect time with the right product, further assisted by the fact that nobody saw such a phenomenon taking shape coming out of the COVID-19 pandemic. There was more than a little bit of luck involved. Even if Alibaba does only half as well from here as Nvidia has, it will still be a fantastic investment.
And yes, it certainly looks like Alibaba could become the Nvidia of China, even if its net opportunity is measurably smaller. Analysts believe the company’s top line is not only going to grow all the way through 2027, but also accelerate the whole time.
Just don’t tarry too long if you’re interested. Although Alibaba stock is a bit overheated right now and arguably due for a dip, it’s unlikely that that dip is going to drag this ticker back down to its most recent major low. Take whatever decent-size discount you can get.
