AsianFin -- China’s Alibaba Group has developed a new AI chip designed to be more versatile than its previous processors and capable of handling a broader range of AI inference tasks, according to a Wall Street Journal report on Friday, citing sources familiar with the matter.

The chip, which is currently in the testing phase, is manufactured by a domestic Chinese company, unlike Alibaba’s earlier AI processor that was produced by Taiwan Semiconductor Manufacturing Company (TSMC). The move aligns with a growing trend among Chinese tech and AI firms to prioritize homegrown technology, especially as foreign AI chip exports face regulatory hurdles.

The focus on domestic AI chips has intensified amid restrictions on Nvidia’s H20 processor, the most advanced AI chip the U.S. had allowed for sale in China. Earlier this year, the Trump administration effectively blocked H20 sales, limiting Chinese companies’ access to high-end AI hardware. While the U.S. recently resumed H20 exports to China, domestic companies have accelerated development of alternatives to reduce reliance on foreign chips.

Alibaba’s initiative comes alongside broader pressure from Beijing, which has encouraged local firms—including Alibaba and ByteDance—to rely on domestic AI chips rather than importing restricted foreign products. Analysts say the push reflects both national security concerns and industrial policy goals, as China seeks to build a self-sufficient AI hardware ecosystem capable of supporting its rapidly growing AI sector.

The new chip could position Alibaba to expand its AI offerings across cloud computing, e-commerce, and other applications requiring high-performance inference, while also reducing dependency on overseas suppliers. Industry watchers expect this move to further intensify competition among Chinese AI chip makers and accelerate domestic innovation in the sector.