China’s AI chip push is turning US sanctions into an opportunity

Alibaba Group, on Wednesday, introduced a new AI chip called Zhenwu M890, as it intensifies efforts to build domestic alternatives to Nvidia processors ‌amid tightening US export curbs.

This chip delivers three times the performance compared to its previous edition, and is purpose-built for the coming wave of AI “agents”, which are software systems that can carry out complex tasks with limited human oversight.

This launch comes at a time when firms in China are looking to boost their chip production as the US restrictions on NVIDIA’s advanced chips’ export to China continues.

At the same event where the new chip was launched, NVIDIA outlined a roadmap of high-end chip production through 2028, which suggests a sustained cadence of in-house silicon upgrades, as per Reuters.

Alibaba had, in 2025, pledged to spend more than $53 billion on cloud and AI infrastructure over a period of three years, which is their largest commitment to the sector.

On the other hand, Huawei has also upped their game, and their Ascend chips are becoming central to China’s attempts at becoming self-reliant in chip production.

Wiht the deployment of of Ascend 910B/910C chips as well as Chinese cloud providers also picking the same.

Such has been Huawei’s performance when it comes to developing high-end chips, that even NVIDIA CEO Jensen Huang, as per a CNBC report, had to acknowledge that his company has ‘largely conceded’ the AI chip market in China to Huawei.

China competes in scale

The Chinese technology firms are competing with NVIDIA in terms of scale. Under initiatives like Made in China 2025, Beijing has poured around $47 billion for domestic chipmaking and equipment.

The Chinese government has also introduced economic incentives for companies using domestic chips. Gansu, Guizhou, and Inner Mongolia provinces have cut electricity costs by upto 50% for those AI data centers using domestic chips instead of NVIDIA products, as per The Economy.

As per IDC data cited by industry reports, Chinese firms now control around 41% of the country’s domestic AI chip market, showing a sharp boost since the US put restrictions on NVIDIA imports into the country. Huawei alone reportedly shipped around 812,000 AI chips in 2025, and Alibaba, on the other hand has shipped around 560,000 Zhenwu chips to around 400 enterprise customers, as per Reuters.

Scarcity becoming innovation driver

When China faced an AI chip scarcity, it forced Chinese firms to innovate, thus proving once again the age-old proverb, “Necessity is the mother of invention.” It can thus be said that Xi must thank the US’ policies that pushed Chinese firms to adapt, improvise, and overcome the challenges set forth by US restrictions.