Alibaba bets on homegrown chips as Huawei fills Nvidia void
Watch: Q4 Cloud contribution margin trajectory and whether 30%+ Cloud growth sustains despite capex; if it does, the stock (down 35% from highs) has room to recover as the $100B revenue thesis becomes credible.
Full analysis
Q3 revenue grew just 2%, missing estimates, but AI and cloud segments accelerated 36% and 35% respectively. Alibaba secured orders from Huawei's new 950PR AI chip—itself gaining traction from ByteDance and Alibaba—signaling a broader Chinese pivot away from Nvidia-dependent architectures. The company unveiled its own custom chip for agentic AI and reaffirmed a $100 billion five-year AI and cloud revenue target, pricing AI services up 34%. Supply chain diversification is shielding Alibaba from US export restrictions while reinforcing its cloud-to-semiconductor vertical integration play.
Alibaba is morphing from a pure cloud player into a semiconductor-enabled infrastructure vendor, reducing Nvidia dependency while capturing value across the AI stack—but near-term margins remain under pressure from capex and the broader ecommerce slowdown (consumption revenue +6%) creates a wedge between AI hype and core business reality.
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