Alibaba Group Holding Ltd. (BABA) shares rallied Thursday after reports suggested the company could soon gain expanded access to Nvidia Corp.'s (NVDA) advanced artificial intelligence chips. It's the kind of news that matters when you're trying to stay competitive in the AI arms race.
The Chinese e-commerce giant gave back some of those gains in Friday's premarket session, but not before posting a rally of more than 5% the previous day. What sparked the excitement? Word that China may approve limited imports of Nvidia's H200 chips as soon as this quarter.
Here's where things get interesting. Nvidia is walking a tightrope, trying to reopen a critical market while managing the geopolitical mess between Washington and Beijing. The chipmaker has tightened its sales approach dramatically, now requiring Chinese customers to pay in full upfront for H200 orders and accept rigid, no-flexibility terms. It's essentially a "take it or leave it" situation.
Beijing's Calculated Approach
Chinese regulators are preparing to approve limited H200 imports as soon as this quarter, but with strings attached. The chips would be available for select commercial uses while remaining off-limits to the military, sensitive government agencies, and state-owned enterprises. It's a measured response that tries to balance economic competitiveness with security concerns.
Officials have also asked some Chinese technology firms to temporarily pause orders and are considering requirements that buyers purchase domestically made chips alongside Nvidia products. Think of it as a "buy local" mandate bundled with your imported hardware.
Against this backdrop, Alibaba has privately told Nvidia that it wants to order more than 200,000 units of the H200, according to Bloomberg. That's a massive order that signals serious ambition in the AI space.
What This Means for Alibaba
Investors responded enthusiastically to expectations that China will allow domestic companies to use Nvidia's H200 chips, a development that would support firms like Alibaba, according to Vey-Sern Ling, managing director at Union Bancaire Privee.
The H200 is an older-generation chip that the Trump administration has indicated can be exported to China amid escalating geopolitical tensions. It's not cutting-edge, but it's powerful enough to make a real difference for cloud computing operations.
Alibaba has emerged as the largest AI spender among Chinese technology companies, and a more reliable chip supply would strengthen its cloud business considerably. The company needs these chips to compete effectively in the increasingly competitive artificial intelligence market.
The stock has gained 92% over the last 12 months, driven by strong investor confidence in its substantial investments and growth in AI, particularly in its cloud computing division. Getting access to H200 chips would only accelerate that momentum.
BABA Price Action: Alibaba shares were down 2.51% at $150.59 during premarket trading on Friday.
