One analyst pointed out that Alibaba Group Holding Ltd.’s cloud division is in the “crosshairs” of the Trump administration’s trade battle with China, which caused the company’s U.S.-listed shares to drop almost 5% on Wednesday.
Late Tuesday, Nvidia Corp. revealed that it was subject to new limitations on its sales to China. Colin Sebastian, an analyst at Baird Equity Research, stated that the move might make it more difficult for Alibaba (BABA) to keep growing its revenue from its AliCloud cloud computing division.
In order to export its H20 chips—models that had previously been lowered to conform to current regulations for the Chinese market—NVIDIA now requires a license from the US government. Nvidia’s decision to write off billions in H20 inventory indicates that the business isn’t confident it will be able to obtain those licenses, according to an analyst at Melius Research.
Alibaba is “a likely large customer of H20s,” according to a note sent to clients by Sebastian of Baird. “In China, we believe the combination of DeepSeek + H20 chips proved to be a compelling combination for [artificial intelligence] model development, although the U.S. government is concerned the chips could be used to power development of restricted supercomputers.”
Sebastian went on to say that Nvidia’s export issues with its H20 processor would cause some of Alibaba’s more sophisticated generative-AI projects to be delayed and will probably increase the need in China for local alternatives to the graphics processing units made by Advanced Micro Devices Inc. (AMD) and Nvidia. Alibaba most likely employs a combination of its own proprietary processors, domestic products, and Nvidia GPUs at the moment.
AliCloud has been a “bright spot” for Alibaba, “as e-commerce competition remains intense,” Sebastian said, making the loss particularly frustrating for the company.
After the U.S. government stated that the company required an export license to sell the chip to the Chinese market, including Hong Kong and Macau, Nvidia announced in a regulatory filing on Tuesday that it would be incurring a charge of $5.5 billion in its fiscal first quarter related to the write-down of inventory and customer contracts for its H20 chip. Nvidia provided no additional context, and it is unclear at this time whether it would provide a different kind of GPU for the Chinese data center industry.
With a price target of $147, Sebastian kept his outperform rating on Alibaba’s stock. The stock of Alibaba, which is listed in the United States, has risen 27% so far this year.
