Furthermore, reports have emerged that Alibaba has created a new AI chip for its cloud computing division. While the new chip is not intended to compete with Nvidia (NASDAQ:NVDA) Hopper series of chips, much less the new Blackwell lineup, that’s not the actual goal. The focus is on ensuring Alibaba can secure a supply of AI semiconductors despite U.S. export restrictions while also enhancing the competitiveness of its cloud business as AI adoption continues to rise.

This development also takes place against a backdrop of geopolitical tension. The U.S. has prohibited leading-edge chip exports to China, with Nvidia’s H20 being restricted earlier this year. Though shipments have since been conditionally permitted, Chinese companies still face uncertainty, and reports suggest that Beijing has advised companies to refrain from relying on the H20. By creating its own chip, Alibaba can diminish its reliance on U.S. suppliers while meeting China’s rapidly increasing need for AI capabilities.

In summary, the new chips are likely to supplement Nvidia's GPUs in Alibaba's broader AI strategy. The company will probably continue to depend on Nvidia hardware for training AI models in the short term, while its own chips focus on powering cloud-based inference on a large scale. Other Chinese companies are also intensifying efforts in developing AI chips. Baidu, Huawei, and startups such as Cambricon are all working on AI semiconductors. However, Alibaba’s established presence in cloud computing gives it a distribution advantage. It can swiftly integrate new chips into its extensive data centers and monetize them through its existing customer base.^[[1] https://archive.ph/cWWzv]

SponsorBlock, Timestamps, and Generated Summary below:

Articles mentioned:

1. https://www.forbes.com/sites/greatspeculations/2025/09/03/alibabas-ai-chip-a-big-deal/ | https://archive.ph/cWWzv

SponsorBlock Timestamp:

1. 0:00.000 - 1:36.000 Tangents
2. 1:36.000 - 1:45.500 Forbes Article: Alibaba’s AI Chip A Big Deal?

Generated Summary:

Alibaba's New AI Chip and the Diverging Tech Landscape

This video discusses Alibaba's development of a new AI chip and what it signifies in the context of the growing divergence between Western and Chinese technology industries. It explores the implications of this split for global technology consumers and the challenges and opportunities it presents.

Key Points:

• Alibaba's AI Chip: Alibaba has created a new AI chip for its cloud computing division, aiming to secure its AI semiconductor supply amidst US export restrictions and enhance its cloud business competitiveness.
• Not a direct competitor to Nvidia: The chip isn't designed to compete with Nvidia's high-end chips but to ensure a stable supply for Alibaba's cloud services.
• Inference-focused: The new chip is designed specifically for inference workloads, not for the more resource-intensive training of AI models.
• 7nm Manufacturing Process: The chip is manufactured using a 7nm process, which, while not the cutting edge, demonstrates China's progress in semiconductor manufacturing.
• Compatibility with Nvidia's Ecosystem (Potentially): There are reports that the chip may be compatible with Nvidia's software ecosystem, which raises questions about CUDA compatibility.
• Cloud-Centric Approach: Alibaba will not sell the chips directly but will use them to enhance its cloud services, aiming to increase customer dependency and recurring revenue.
• Significant Investment: Alibaba is investing approximately $53 billion in AI infrastructure over the next three years, reflecting the growth in its cloud and AI-related revenues.
• Diverging Tech Landscape: The video highlights the increasing split between Western (American-centric) and Chinese technology industries, driven by US sanctions and China's push for self-reliance.
• Global Implications: This divergence raises questions for non-American and non-Chinese technology consumers regarding risk tolerance, regulatory burdens, and supply chain considerations.
• Regulatory Hurdles: US efforts to restrict China's access to GPUs and other technologies are creating regulatory hurdles for companies worldwide, potentially leading them to seek alternative solutions.
• Hardware vs. Software: The video emphasizes that while software development is relatively easier, China is focusing on hardware production, signaling a long-term commitment to building a comprehensive AI ecosystem.
• Technological Walls: The discussion touches on the possibility of hitting technological limits in chip manufacturing and the potential consequences for competitiveness.
• Purchasing Power Parity: The presenter notes that the $53 billion investment in China could yield significantly more resources due to purchasing power parity compared to the same investment in the West.

Highlighted Information:

• "China is building the systems for 80% of the planet and the United States is building systems for people that look like us." This statement underscores the potential for China to dominate the global technology market due to its focus on serving a broader range of needs and demographics.
• The presenter encourages viewers to read "The Chip Wars," a book providing context on the historical development and challenges of chip manufacturing.
• The video emphasizes the importance of considering resource availability and regulatory burdens when designing technology systems, not just desired performance.

About Channel:

I do tech, fail, and then do more tech...^[[1] https://www.linkedin.com/in/eli-etherton-a15362211/]

Video Deacription:

1. Show Up Anyway - Don't Let Austin City Council Win [09:20 | AUG 27 2025 | https://youtu.be/iscDYp6dtl8]
2. Austin Votes on $2M AI Park Surveillance in 48 Hours - Thursday 10AM City Hall. Show Up [13:18 | AUG 25 2025 | https://youtu.be/g4vL1ERdZ9Y]

About Channel:

I started as a studio repair technician at Avatar & started a Macbook component level logic board repair business. This channel shows repair & data recovery work & shows how to perform these repairs step by step. There are many things that make it hard to fix things now; willful actions from manufacturers to limit access to parts & schematics. I talked about this to try and spark mainstream recognition of the "Right to Repair" movement.

Restrictions placed on repair were just a canary-in the-coal-mine for many of the anti-ownership, anti-consumer practices that would become common in every industry, which I discuss & try to push back against every day.

Generated Summary below:

Substack Article: https://kdwalmsley.substack.com/p/chinas-overcapacity-was-always-deliberate | https://archive.ph/ci9BW

Video Description:

Top AI experts from Silicon Valley were stunned upon seeing China's enormous head start across all segments of applied artificial intelligence.

Of particular concern was China's access to cheap electricity, which is simply not available in the United States, and very likely never coming.

The experts conclude that the AI race is likely already over.

In China, the power demand increases each year by the equivalent of an entire Germany's worth of electricity consumption. But China's energy supplies are growing much faster, and add two Germany's worth of power annually.

This abundance, which is typical of "overcapacity" of so many other critical building blocks of industry, is the result of a deliberate strategy, executed over decades: Chinese planners develop infrastructure far in advance of when it will be needed.

Closing scene, Guangfulin Ancient Relics Park, Shanghai

Resources and links:

1. Reuters, Yellen pushes for joint G7 response to China's industrial overcapacity | https://www.reuters.com/markets/yellen-says-us-europe-must-respond-jointly-chinas-industrial-overcapacity-2024-05-21/ | https://archive.ph/CHsmP
2. Overcapacity: the economic buzzword fuelling Europe’s clash with China | https://www.scmp.com/news/china/diplomacy/article/3315106/overcapacity-economic-buzzword-fuelling-europes-clash-china | https://archive.ph/rIDKV
3. Deloitte, Can US infrastructure keep up with the AI economy? | https://www.deloitte.com/us/en/insights/industry/power-and-utilities/data-center-infrastructure-artificial-intelligence.html | https://archive.ph/Cq6we
4. TechBuzz China | https://techbuzzchina.com/team/ | https://archive.ph/7MWEk
5. https://www.lantaugroup.com/people/David+Fishman | https://archive.ph/1kXQl
6. https://x.com/ruima/status/1955040979259650267 | https://archive.ph/8L4IP
7. Fortune, AI experts return from China stunned: The U.S. grid is so weak, the race may already be over | https://fortune.com/2025/08/14/data-centers-china-grid-us-infrastructure/ | https://archive.ph/rD2R4
8. Magnificent Seven Hit Record $19.6T on AI Surge | https://www.voronoiapp.com/markets/-Magnificent-Seven-Hit-Record-196T-on-AI-Surge-3004 | https://archive.ph/UhwTE
9. Will we have enough natural gas turbines to power AI data centers? | https://www.marketplace.org/story/2025/05/20/turbine-shortage-slows-new-natural-gas-plant-construction | https://archive.ph/uCq1c
10. Number of nuclear reactors under construction worldwide as of June 2025, by country | https://www.statista.com/statistics/513671/number-of-under-construction-nuclear-reactors-worldwide/ | https://archive.ph/kLvzS
11. Ranked: America’s Cheapest Sources of Electricity in 2024 | https://www.motive-power.com/ranked-americas-cheapest-sources-of-electricity-in-2024/ | https://archive.ph/Bejx3

Generated Summary:

This video discusses China's significant lead in applied artificial intelligence (AI) and how its deliberate "overcapacity" in electricity generation provides a crucial advantage over the US. It argues that China's proactive infrastructure development, driven by long-term strategic planning, contrasts sharply with the US's reactive, profit-driven approach, potentially leading to the US falling behind in the AI race.

Key Points:

• China's "Overcapacity" is Intentional: Unlike Western perceptions, China views overcapacity as a solution and a guarantee against future problems, particularly in energy.
• AI Integration in Chinese Industry: AI is deeply embedded in all aspects of Chinese industry, from raw material extraction to finished product manufacturing.
• US Energy Bottleneck: The US faces significant obstacles in building data centers due to the strain on the electricity grid. Meeting the future energy demands of AI data centers is a major challenge.
• China's Energy Security: China has solved its energy problem with secure and cheap electricity, taken for granted across the country. They consistently add more electricity supply than demand, operating from a position of abundance.
• Deliberate Overbuilding: China's strategy involves decades of deliberate overbuilding and investment in all aspects of the energy industry, resulting in a reserve margin of 80-100% nationwide.
• Incentive Structures: Chinese policymakers prioritize infrastructure development before demand arises, unlike the US, where private investors demand immediate returns.
• Silicon Valley's Misplaced Priorities: Despite having access to massive capital, Silicon Valley prioritizes short-term upgrades over addressing the fundamental power problem needed for AI growth.
• Expert Observations: AI experts visiting China have concluded that the US may already be behind in the AI race due to these factors.
• US power generation is not keeping pace: The US does not have the supply chains to produce the equipment for natural gas power plants, it takes too long to build a nuclear plant, and solar and wind power projects were killed by the Trump administration.
• China adds one Germany of electricity demand every year and adds two Germanies of electricity supply every year.

Highlight:

The video emphasizes that China's "overcapacity" is not a problem but a deliberate strategy, providing a significant advantage in the AI race. This proactive approach contrasts sharply with the US's reactive, profit-driven system, where infrastructure development lags behind demand.

About Channel:

Key insights and strategies for global business owners and managers, from inside the world's factory and supply chains.

We live and work in Mainland China, and travel extensively throughout the country to find the highest-quality products at competitive prices, for markets abroad.

During many of our videos, we are saying a quiet prayer for the peace of the world, and that our content is helpful to our listeners.

To support our channel financially, or for transcripts and direct links, and additional resources, please visit our Substack at https://kdwalmsley.substack.com/ Or please consider, instead, supporting one of the many orphanages or ministries here in South Asia, or elsewhere in the developing world.