Alibaba shares rise after it lands major customer for its AI chips

Alibaba shares rose on Wednesday after Chinese state media reported that the e-commerce giant secured a major customer for its artificial intelligence chips.

China Unicom will deploy Alibaba’s AI accelerators from its semiconductor unit called Pingtouge or T-Head, according to a report from China state broadcaster CCTV. Alibaba does not sell chips directly, but companies can effectively use the computing power based on those semiconductors by buying Alibaba cloud services.

A person familiar with the matter endorsed the accuracy of the CCTV report to CNBC.

Alibaba was not immediately available for comment when contacted by CNBC.

Shares of Alibaba closed more than 5% higher in Hong Kong, and the company’s U.S.-listed stock was up more than 2% in premarket trade.

Alibaba’s computing power will be used by China Unicom, the country’s second-largest telecommunications company, as part of a big new data center project in China that will also include chips from other domestic firms including MetaX and Biren Technology.

The move underscores China’s efforts to boost the use of its own domestic semiconductors for AI at a time when Nvidia’ access to the world’s second-largest economy remains in a state of flux.

On Wednesday, the Financial Times reported that China’s internet regulator, the Cyberspace Administration of China, told companies to stop buying certain Nvidia AI chips. Shares of Nvidia were about 1% lower in premarket trading.

Alibaba is one of China’s leading AI players. It has developed its own AI models and is one of the biggest cloud computing players locally. At the same time, it is developing a brand new AI chip, CNBC reported last month.

It is unclear if China Unicom is using Alibaba’s latest chips. Information about the two companies’ partnership emerged after CCTV showed a billboard containing the details as part of a report on the telecoms giant’s new Sanjiangyuan data center in Qinghai province.