China’s Alibaba (NYSE:BABA) has developed a new chip that is more versatile than its older chips, the Wall Street Journal reported.
Alibaba was long one of the biggest customers of U.S. tech giant Nvidia (NASDAQ:NVDA). Now the company and other chip designers are filling the void left after Nvidia ran into regulatory hurdles to sell its products in China, the report added.
Companies are coming up with substitutes for Nvidia’s H20 chip, the most powerful AI processor the American company is allowed to sell in China. In July, U.S. President Donald Trump allowed Nvidia to resume H20 exports to China, but after this, China told companies not to buy the chips for now, citing potential security risks that Nvidia says do not exist.
In July, Shanghai-based MetaX unveiled a new chip that it said could serve as a replacement for the H20. The chip has a larger memory than the H20, boosting its power for some AI tasks, but it takes up more electricity. MetaX said Wednesday it was preparing for mass production of the chip, the report added.
Previous cloud-computing chips developed by Alibaba have mostly been designed for particular applications. The new chip, which is now in testing, is meant to serve a broader range of AI inference tasks, the report added citing people with knowledge of the matter.
Alibaba did not immediately respond to a request for comment from Seeking Alpha.
The chip is made by a Chinese company, compared to an earlier Alibaba AI processor which was fabricated by Taiwan Semiconductor Manufacturing (TSM). The U.S. has blocked TSM from manufacturing AI chips for China that use leading-edge technology, the report noted.
China’s Huawei Technologies is also making AI chips. However, Huawei, which faces U.S. sanctions, did not design its chips to work with the Nvidia platform, while Alibaba’s new chip will be compatible with it. This means engineers can repurpose programs they wrote for Nvidia chips, the report added.
Private-sector cloud companies, including Alibaba, have avoided bulk orders of Huawei’s chips, resisting official suggestions that they should help the national company because they consider Huawei a direct rival in cloud services, according to the report.
China’s weakness is training AI models, for which U.S. companies rely on the most powerful Nvidia products. Alibaba’s new chip is designed for inference, not training, the report noted.
AI inference is the ability of trained AI models to recognize patterns and draw conclusions from new data and information that they have not seen before.
Chinese engineers have complained that some homegrown chips have issues when training AI, such as overheating and breaking down in the middle of training runs, the report noted.
On Friday, Alibaba reported its quarterly results and noted that revenue from Cloud Intelligence Group grew 26%, with AI-related product revenue achieving triple-digit growth for the eighth consecutive quarter.