Alibaba Group Holding Ltd. experienced a notable uplift in its stock price on Thursday, prompted by reports suggesting that the company is poised to gain broader access to Nvidia Corporation's advanced artificial intelligence (AI) chips within the Chinese market. This rally was tempered somewhat in early trading on Friday, following an initial gain exceeding 5%.
The catalyst for the positive market response traces back to information indicating that Chinese authorities may soon approve the importation of Nvidia's H200 AI chips on a limited basis, potentially commencing this quarter. This development comes amid Nvidia's cautious approach to re-entering the vital Chinese sector, where the company's sales of H200 chips are being conducted under stringent conditions.
In an effort to balance reopening the market while navigating ongoing geopolitical complexities between Washington and Beijing, Nvidia has implemented strict sales policies for its H200 chip line in China. These include requiring full payment at the time of order and enforcing inflexible contractual terms, according to reports from Reuters.
At the same time, regulatory signals from Beijing indicate a selective relaxation of import restrictions. Chinese regulators are advancing plans to allow limited imports of the H200 chips for specified commercial applications, explicitly excluding military, sensitive government bodies, and state-owned enterprises from access. This nuanced stance suggests a controlled integration of foreign AI technology within China's commercial technology ecosystem.
Additional measures being contemplated include compelling domestic purchasers to acquire locally manufactured chips in conjunction with Nvidia products. There have also been directives issued to certain Chinese tech firms to temporarily suspend placing new orders for these chips, reflecting the complexity of regulatory oversight.
Amid these regulatory conditions, Alibaba has reportedly signaled to Nvidia an intent to purchase a substantial volume — exceeding 200,000 units — of the H200 chip, according to insiders familiar with the matter. This prospective order underscores Alibaba’s strategic prioritization of AI hardware resources.
Market analysts have remarked that investor optimism is aligned with expectations that China’s relaxation on H200 chip usage will favor domestic firms like Alibaba. Vey-Sern Ling, managing director at Union Bancaire Privee, noted that permissive regulatory measures would bolster companies employing these chips.
The H200 represents a preceding generation of AI chips, which, per prior U.S. administration guidelines, remains allowable for export to China despite heightened geopolitical tensions. Alibaba's designation as the largest AI expenditure entity among Chinese technology firms reflects its aggressive expansion into AI capabilities.
By securing a dependable supply of Nvidia’s chips, Alibaba stands to enhance its cloud computing services, a segment that has been pivotal in its sustained growth trajectory. Over the previous twelve months, Alibaba's share price has appreciated by 92%, fueled by robust market confidence in its AI investments and cloud business momentum.
On a recent trading day, Alibaba’s stock price moderated, closing at $150.59, down 2.51% in premarket activity. Meanwhile, Nvidia’s shares showed a modest increase, trading around $185.84.
This scenario exemplifies the intertwined dynamics of technological ambitions, regulatory frameworks, and geopolitical considerations shaping the AI hardware supply chain within China. Alibaba’s moves suggest a deliberate effort to capitalize on the regulatory window to advance its AI and cloud computing capacities, contingent upon obtaining sufficient chip resources despite stringent import controls.