Alibaba, ByteDance, and Others Remain Keen on NVIDIA (NVDA)'s AI Chips

NVIDIA Corporation (NASDAQ:NVDA) is one of the Best Reddit Stocks to Invest in Now. On September 4, Reuters reported that Alibaba, ByteDance, and other Chinese tech firms are keen on NVIDIA Corporation (NASDAQ:NVDA)’s AI chips even though the regulators in Beijing have been strongly discouraging them. Notably, they need reassurance that their orders of Nvidia’s H20 model, which the AI giant has regained permission to sell in China, are being processed. They are also monitoring the company’s plans for a more powerful chip, likely to be named B30A and which is based on its Blackwell architecture, reported Reuters.

Reuters further reported that the US President Donald Trump has also settled a deal with NVIDIA Corporation (NASDAQ:NVDA) for it to provide the US government 15% of the H20 revenue. For Q3 2026, NVIDIA Corporation (NASDAQ:NVDA) expects revenue to be $54.0 billion (plus or minus 2%), not assuming any H20 shipments to China in the outlook. Loomis Sayles, an investment management company, released its Q2 2025 investor letter. Here is what the fund said:

“NVIDIA Corporation (NASDAQ:NVDA) is the world leader in artificial intelligence (AI) computing, which enables computers to mimic human-like intelligence for problem solving and decision making capabilities. Founded in 1993 to develop faster and more-realistic graphics for PC-based video games, Nvidia created the first graphics processing unit (GPU), a dedicated semiconductor that employs a proprietary parallel processing architecture to perform superior graphics rendering outside of a computer’s standard central processing unit (CPU). The parallel processing capability of Nvidia’s GPUs, which contrasts with the linear processing requirement of CPUs, can accelerate computing functions performed by standard CPUs by greater than ten times. As a result, Nvidia extended its visual computing expertise beyond its legacy gaming market into innovative new and larger markets, including data centers, autos, and professional visualization. The parallel processing capability facilitates pattern recognition and machine learning functions that have enabled Nvidia to be at the forefront of growth in artificial intelligence applications. As a result, the data center business, which first surpassed the gaming business to become Nvidia’s largest revenue and profit generator in its 2023 fiscal year, grew to represent over 88% of revenue in the company’s most recent fiscal year. The company is also focused on building out its GPU-computing-based ecosystem and is helping to enable breakthroughs in autonomous driving, and virtual reality.

A fund holding since the first quarter of 2019, Nvidia reported very strong quarterly financial results that reflected the company’s dominance in capturing spending on AI computing within data centers. For the quarter, total revenue of $44.1 billion grew 69% year over year and 12% versus the prior quarter, despite new U.S. Government restrictions on the sale of its H20 chips to China that resulted in $2.5 billion of foregone revenues in the period. Nvidia’s H20 chips were specifically designed to comply with prior U.S. export restrictions, and the company anticipates a further $8 billion of foregone sales in the current quarter due to the restrictions. Despite the revenue headwind, the company expects revenue of approximately $45 billion in the current quarter, which would represent 50% growth over the prior-year quarter. The results were also notable due to recent concerns that spending might slow given potentially cheaper options to develop AI functionality. These concerns were catalyzed by the January 2025 launch of DeepSeek-V3, a chatbot that appears to rival OpenAI’s ChatGPT from the standpoint of industry performance metrics, but which was claimed to have been created for a fraction of the cost using Nvidia’s now-restricted H800 chips. We did not believe that the DeepSeek development materially changed the level of investment needed to develop the next generation of frontier models as companies strive for AGI (artificial general intelligence) and beyond. We believe this view is supported by the unchanged plans for AI investment by the industry’s leading spenders. Following the news, some of the world’s largest investors in AI technology, including Meta, Microsoft, and Alphabet, reaffirmed and expanded on their intention to spend tens of billions of dollars in 2025. We believe this supports our thesis that Nvidia’s accelerated computing technology remains crucial to achieving AGI and other AI advances. Further, Nvidia noted that the success of DeepSeek, which employs reasoning AI, has itself been a driver of strong demand. With reasoning AI, as opposed to providing a “one-shot” answer based on statistical probabilities and existing patterns, the model spends more time refining the answer by running it through the model multiple times before outputting an answer that is more accurate and nuanced. As a result, reasoning AI is more compute intensive and can require 100 times more computing power per task than one-shot inferencing. With continued evidence that greater capabilities can be achieved with greater computing power and expanding use cases such as agentic AI, we believe both near-term and long-term demand will remain strong…” (Click here to read the full text)

While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 13 Cheap AI Stocks to Buy According to Analysts and 11 Unstoppable Growth Stocks to Invest in Now

Disclosure: None. This article is originally published at Insider Monkey.