Sees optimizing its entire cloud around homebrew silicon as the way to compete
Chinese web giant Alibaba has revealed its T-Head chipmaking business has shipped 470,000 AI chips, and admitted they are currently inferior to rival products, but believes it can build a mutually optimized stack that makes performance gaps moot.
CEO Yongming Wu revealed the 470,000 figure during the company’s Q3 2026 earnings call, without specifying the model he referred to. Alibaba has created several chips at least three chips designed for AI workloads, including the infamously buggy XuanTie C908, the TH1520 for edge AI, and the Pingtouge Zhenwu 810E. The latter debuted in January and is thought to be competitive with Nvidia’s H20, a throttled version of a 2023-vintage Hopper architecture accelerator.
If Wu was referring solely to the 810E, delivering 470,000 since January is impressive as it puts Alibaba’s output at the same pace as Nvidia’s: CEO Jensen Huang last year said the company shipped six million Blackwell GPUs in a year.
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However the Zhenwu 810E cannot compete with accelerators from Nvidia or AMD, a fact Wu acknowledged.
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“Given that our chips still lag behind foreign counterparts and performance in various respects, we aspire to engage in more profound co-design with Alibaba's cloud infrastructure and the Qwen model to provide improved cost effectiveness,” the CEO said. “This is one key differentiator and how we approach chip design at T-Head that sets us apart from other chip companies. Our primary goal is to create AI capabilities that offer superior value for money.”
He also said developing its own chips gives Alibaba “guaranteed supply of AI computing power,” which he said is necessary given “the unique circumstances currently facing the AI industry in China” – likely a reference to US export bans on advanced accelerators.
Wu also thinks developing its entire stack will mean Alibaba can lower inferencing costs, and that doing so will mean the company’s cloud can rake in plenty of profits as demand for AI services increases.
Alibaba Cloud is already doing well, growing quarterly revenue 36 percent year-over-year to $6.2 billion. The company predicted it can reach $100 billion of annual cloud and AI revenue within five years.
Wu also commented on speculation that Alibaba plans to spin out T-Head, saying the company doesn’t rule out a future float but has no “definitive time line” for making it happen.
Alibaba’s revenue for the quarter landed at $40.7 billion, representing two percent growth. Execs pointed out that had it not sold some businesses, growth would have been nine percent.
Domestic e-commerce and logistics services remain the company’s main businesses, together accounting for almost half of revenue. International e-commerce services brought in $5.6 billion, a six percent year-over-year increase.
That’s an unwelcome result for Alibaba, given Beijing is looking to its e-commerce giants to help it achieve a goal of increasing export sales.
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That leaves Alibaba’s cloud as its only fast-growing business, and with a lot riding on its ability to achieve the swift surge to from around $25 billion to $100 billion annual revenue.
CEO Wu thinks that growth is achievable because Alibaba Cloud saw a 6x increase in token consumption on its model studio platform in the last six months alone.
He thinks that kind of growth will recur.
“Cloud and software budgets for enterprise IT services have traditionally represented only around 5 percent of corporate revenue,” he said. “As model-driven agents begin to handle mainstream work tasks across industries, our total addressable market will expand by several multiples.” ®