Alibaba's Dual-Pronged Strategy for Semiconductor Independence

Alibaba pursues chip self-sufficiency with its new XuanTie C950 processor and Huawei Ascend orders, while heavy AI investments pressure profits and stock price.

The Chinese e-commerce and cloud giant Alibaba Group is aggressively pursuing a two-track approach to reduce its reliance on Western chip technology. In a significant push for self-sufficiency, the company is both partnering with domestic champion Huawei and advancing its own in-house semiconductor designs.

Building an In-House and Partnership Ecosystem

Alibaba's semiconductor unit, T-Head, recently unveiled its latest innovation: the XuanTie C950. This processor, built on a 5-nanometer process and utilizing the open-source RISC-V architecture, is touted by the company as the world's fastest RISC-V chip. It reportedly delivers performance more than triple that of its predecessor, the C920, and is engineered specifically for cloud computing and AI agent workloads, aiming to power autonomous enterprise software.

Concurrently, Alibaba is collaborating with ByteDance to place larger orders for Huawei's new Ascend 950B AI processor. Designed for AI inference tasks, this chip is scheduled to enter mass production in April. Huawei has outlined plans to ship approximately 750,000 units by 2026. A key feature for developers is the chip's enhanced compatibility with Nvidia's CUDA software ecosystem, which is intended to simplify integration into existing AI infrastructure. The standard version is priced around 50,000 yuan (approximately $7,200), with a premium variant featuring HBM memory costing about 70,000 yuan.

Institutional Sentiment and Financial Performance Diverge

This technological progress unfolds against a backdrop of mixed signals from investors and financial results. Recent regulatory filings reveal divergent moves among institutional holders. Exchange Traded Concepts LLC boosted its stake by 37.1% in Q4 2025, bringing its holding to roughly 100,700 shares. In contrast, KMG Fiduciary Partners reduced its position by 26.4%. The overall proportion of shares held by institutional investors currently stands at 13.47%.

Operationally, the environment remains challenging. While Alibaba's cloud division posted robust year-on-year growth of 36%, with AI-related workloads seeing triple-digit percentage increases, heavy investment costs are weighing on profitability. The company's most recent quarterly profit fell by approximately two-thirds. Reflecting these pressures, the stock has declined around 20% since the start of the year and trades well below its 52-week high of 161.60 euros.

Analysts Adjust Targets Amid Long-Term Confidence

Market analysts maintain a generally favorable outlook but have tempered their near-term expectations. Susquehanna reaffirmed its positive rating but lowered its price target from $190 to $170. DZ Bank downgraded the stock from "Buy" to "Hold," setting a target of $135. The consensus recommendation remains "Moderate Buy," though analysts caution that margin pressure from the aggressive AI investment drive is likely to persist.

Beyond its chip initiatives, Alibaba is also advancing on the application front. The company is rolling out "Accio," an AI agent designed for global supply chain management. Furthermore, its Qwen AI model has been selected as the official AI assistant for the Milan 2026 Winter Olympics.