Chinese Internet Giants are Doubling Down in AI Chip War. 2 Names to Watch

The Chinese internet giants are definitely worth keeping on your radar, even if you’re content with sticking with America’s biggest and brightest tech stars. The Magnificent Seven are stellar, and they could pick up the pace again in the new year, especially if we are in for an AI monetization boom of sorts. That said, the AI race is a global one, and it’s worth checking in every once in a while on the competition to check in on where the rivals stand. Undoubtedly, there’s serious concern among tech elites as to China’s ability to catch up or even pull ahead in the AI race.

In prior pieces, I remarked on Jensen Huang’s view that Chinese rivals aren’t too far behind in the AI race. If he thinks Chinese AI innovators are just “nanoseconds” behind, I think it’s an absolute mistake to write off the Chinese internet giants, especially given the unique advantages they may possess. In many ways, it seems like the big tech in China is more than willing to hit the gas pedal to advance its position in the global AI race. And it’s not just about AI models, either. The big Chinese internet giants are investing increasing sums in AI chips.

New Nvidia GPUs might be coming for China, but don’t count on China’s AI chip innovators to slow down

Even if Nvidia (NASDAQ:NVDA | NVDA Price Prediction) gets the green light to sell its top-performing AI chips (think the H200) in China, I don’t think China’s titans are going to pull the brakes on their efforts, especially since there is always the risk that the federal government has second thoughts and decides to prevent Nvidia from selling its best to their Chinese rivals. Just look at the hyperscalers, all of which are investing in their own silicon projects to lessen dependence on third-party GPU makers.

Of course, the shift to ASICs (Application Specific Integrated Circuits) is a big one that could mint a new class of semiconductor winners. Perhaps it’s the hyperscalers themselves that stand out as the big long-term AI chip winners, whether we’re talking about Alphabet (NASDAQ:GOOG) and Google TPUs, or a rival ASIC built by another Magnificent tech titan. In any case, the AI chip race is every bit as important, if not more so, than the AI model race.

And China seems to be positioning itself to take control. Aside from backing up the truck on GPUs, China’s top AI titans are also innovating considerable sums in R&D to create a cutting-edge AI chip that might offer a different take than what America’s innovators are familiar with. Could the AI chip scene see its own version of DeepSeek? Time will tell. Either way, it’s worth keeping tabs on the AI boom going on in China.

Baidu and Alibaba are the AI chip darlings picking up speed

At this juncture, Baidu (NASDAQ:BIDU) and Alibaba (NASDAQ:BABA) are the AI chip darlings to watch carefully, as they get aggressive with their respective hardware pushes. Alibaba is pouring the equivalent of $53.1 billion (around 380 billion Chinese yuan) into the next three years, much of which will go towards its new AI inference chip that might be best for its Qwen LLM (large language model).

As for Baidu, its latest Ernie model hasn’t been a hit. But with the potential to spin off its chip business, I do think there’s a lot of potential value to be unlocked should such a move happen in the new year. Either way, Baidu and Alibaba are AI chip titans that might be able to narrow the gap sooner than expected.

Like the U.S. tech trade, shares of Baidu and Alibaba have been on the retreat of late. Though it’s too soon to tell if it’s the start of a Chinese version of an AI bubble burst, I do think the pullback is more of an opportunity than a red flag to sell.