China's Alibaba Group (NYSE:BABA) and Baidu.com (NASDAQ:BIDU) have begun using internally designed semiconductors to train their AI models, partly replacing those made by Nvidia, The Information reported on Thursday, citing people with direct knowledge of the matter.
The media outlet noted that Alibaba has been deploying its Zhenwu processors for smaller AI models since early 2025, while Baidu has started testing its Kunlun P800 chip to train updated versions of its Ernie AI model.
US export restrictions have limited China’s access to these advanced semiconductors, prompting Chinese companies to ramp up building and adopting their own chips.
“We see the news as largely expected, given China's recent push for its domestic companies to eschew foreign parts in favor of local supply," Wedbush analysts wrote in a note to clients.
“The question rather in our view is how successful this strategy proves (particularly in light of process technology limitations for Chinese fabs), and whether large Internet companies continue to favor domestic supply if the US approves more performant future parts."
The analyst added they believe expectation of any China revenues have been pulled out of Nvidia expectations following the company's recent earnings.