Alibaba’s Bold AI Chip Gambit Faces Fierce New Rivalry

Alibaba ( (BABA) ) has been popular among investors this week. Here is a recap of the key news on this stock.

Alibaba is back in the spotlight as it doubles down on artificial intelligence, even as competition intensifies at home. The stock jumped about 5% after reports that Alibaba is preparing its AI chip division, T-Head, for a potential IPO by carving it out as a separate, partially employee-owned unit. T-Head, founded in 2018, designs computing and storage chips and recently won a deal to supply AI accelerators for a major China Unicom data center, positioning Alibaba as a stronger domestic alternative at a time when access to Nvidia chips in China is restricted. The move fits neatly into Alibaba’s broader AI-first strategy, backed by a pledged $53 billion investment in AI and cloud infrastructure. Investors are betting that a successful T-Head listing and rising demand for domestic AI hardware could unlock value and support future earnings growth.

At the same time, Alibaba faces mounting pressure in its core AI cloud business. ByteDance, through its Volcano Engine cloud platform, is rapidly gaining ground by using powerful AI tools and aggressive pricing to lure corporate customers. IDC data shows Alibaba still leading China’s AI cloud market with about 23% share in the first half of 2025, but ByteDance has surged to nearly 13%, making it the fastest-growing challenger. This raises questions about whether Alibaba will have to sacrifice margins to defend its leadership. Despite the rising rivalry and recent share-price volatility, Wall Street remains bullish: analysts rate Alibaba a Strong Buy, with average price targets implying roughly 20–23% upside from current levels. For investors, Alibaba now looks like a high-conviction AI play in China—offering significant upside but with growing competitive risks that will need close watching.