Chinese firms Alibaba (BABA) and Baidu (BIDU) have started using their own chips to train artificial intelligence models, according to The Information. The move partly reduces reliance on Nvidia (NVDA), which has long been the leading supplier of AI processors in China, and raises fresh questions about how much of Nvidia’s China business could be at risk.
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Alibaba has already used its in-house chips for smaller AI models this year, while Baidu is testing its Kunlun P800 chip to power new versions of its Ernie model. Both companies still use Nvidia chips for their most advanced projects, but the shift shows how local players are working to cut dependence on U.S. technology.
Export Limits Push Local Chip Use
The change follows tighter U.S. export rules that restrict Nvidia from selling its most powerful processors in China. The H20 chip, the strongest model it can still supply, is less capable than the flagship H100 or the new Blackwell series.
Even so, Alibaba’s chip is now seen as competitive with the H20, according to employees cited in the report. Baidu’s Kunlun line also reflects Beijing’s push for companies to adopt home-grown chips to secure supply chains and reduce reliance on U.S. suppliers.
Nvidia Faces Business Risk in China
China has been a key market for Nvidia, but demand could weaken if Alibaba and Baidu continue to scale their in-house chips. The Information predicts Nvidia’s China sales may shrink further, adding pressure from U.S. trade restrictions.
Nvidia has acknowledged the rising challenge. In response to the report, a company spokesperson said, “The competition has undeniably arrived.” CEO Jensen Huang recently added that talks with the U.S. government on licensing a scaled-down version of its next-generation chip for China would take time.
Analysts Weigh the Impact
While Alibaba and Baidu are unlikely to drop Nvidia entirely, their growing use of self-designed processors could limit Nvidia’s growth in the region.
For investors, the key question is whether Nvidia can offset weaker China sales with demand elsewhere, particularly as global AI buildouts continue.
Which Stock Is the Best Buy?
Turning to Wall Street, out of the three stocks mentioned above, analysts see the most upside in Nvidia. The NVDA stock average price target of $210.95 suggests nearly 19% upside from current levels. Meanwhile, the BABA stock average price target of $165.69 implies about 6.6% upside. On the other hand, the BIDU stock average price target of $104.19 points to a 6.8% downside from current prices.
