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Alibaba Rallies on New AI Chip Design, Sending NVIDIA Stock Lower

By Gabriel Osorio-Mazilli | September 02, 2025, 4:18 PM

Dhaka, Bangladesh- 03 July 2025: Smartphone displaying Alibaba logo with shopping cart on a blue background.

The race for the most powerful artificial intelligence in the technology sector isn’t just reserved for companies within the United States. As the technology becomes more commercialized, other countries and their leading businesses are starting to catch up, with the top handful of chipmakers and artificial intelligence engines now available worldwide. However, the fact that some of these companies are overseas will keep most investors at bay (for the wrong reasons).

Warren Buffett has coined the saying “Be greedy when others are fearful, and fearful when others are greedy”, meaning when investors can spot fear in any corner of the market, they should start to take action as soon as possible and hoard some positions for themselves. It is undeniable that the biggest fear—whether rational or exaggerated—for the market is now in Chinese stocks, but there are some reasons to look beyond those concerns.

Especially for a stock like Alibaba Group (NYSE: BABA), a leading blue-chip company in Asia’s powerhouse with a few subtle tricks up its sleeve, some of which are still probably not built into today’s valuations, the same could be said about where Wall Street analysts forecast the stock could go in the coming months as well.

Alibaba’s Latest Move, Rewind to DeepSeek

Some investors will remember how the launch of DeepSeek in China sent most of the American technology sector selling sharply lower, as the claims had been made that this company was able to replicate what ChatGPT did with a fraction of the cost (and time to develop).

Currently, over $1 trillion has been invested in artificial intelligence capital expenditures, all in the United States alone. While most of the media coverage and attention suggests that this huge investment will trickle down into a hyperscale model of growth and efficiency, Alibaba’s latest move resembles that of DeepSeek’s in a previous technology feud.

As NVIDIA Co. (NASDAQ: NVDA) announced it will not be selling any H20 chips to China, as a reaction to the ongoing trade tariff negotiations between the United States and China, some matters were taken in another direction. This is why Alibaba decided to start developing its own artificial intelligence chip, directly shrugging off NVIDIA’s pullback from the market.

The reaction from the markets has been positive so far, with Alibaba stock rising by 11% over the past month alone. In contrast, NVIDIA declined by just under 3%, experiencing its most significant drop on the same day Alibaba made the announcement.

Even if this new chip isn’t as powerful or advanced as NVIDIA’s, the vacuum of demand left empty by NVIDIA’s pullback will have to be filled (partially or fully) by Alibaba. It goes without saying that this scenario is extremely bullish for Alibaba’s future, providing investors with a compelling reason to consider a potential buy decision.

Where Alibaba Could Go Next

Considering the stock’s all-time high had been made just over $310 per share roughly three years ago, the massive financial growth and improvement since those highs were made suggest that the company could not only revisit but even surpass these previous ceilings.

Pulling back from this new chip development, investors should recognize that Alibaba is more than just an e-commerce company. It has established data centers throughout Asia, where the fastest-growing middle-class populations are, positioning the company to benefit from a strong tailwind for years ahead.

It makes sense to see Wall Street analysts assign a consensus view of a Moderate Buy for Alibaba, attached to a potential 18.2% upside scenario through a $159.70 price target. However bullish this seems, it is still arguably set on a very conservative assumption for the future of Alibaba and China (again, driven by fear, most likely).

Other participants betting on this optimistic future can be counted from the $7.3 billion worth of institutional buying over the past quarter alone, a signal for retail investors that the future fundamentals are valid enough for these savvy institutions to justify new buying activity.

All told, for those who believe in the artificial intelligence race, considering Alibaba should be a shoo-in for a strategy in this theme. The reason for this is that all of the information and updates have been pretty much built into the opinions for most American technology stocks, leaving a big upside gap to be filled by the time markets catch up to Alibaba’s story.

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The article "Alibaba Rallies on New AI Chip Design, Sending NVIDIA Stock Lower" first appeared on MarketBeat.

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