Chip Market Fragmenting

Alibaba and China Telecom have opened an artificial intelligence data center in Shaoguan, China, built around 10,000 Alibaba-designed Zhenwu chips instead of Nvidia processors. (cnbc.com) The facility was announced on April 8 and is designed for both training and inference, the two main jobs in artificial intelligence computing: teaching models from data and then running them for users. Alibaba said the cluster can support models with hundreds of billions of parameters, and China Telecom will own and operate the site. (cnbc.com) Alibaba said the Shaoguan project is expected to expand from 10,000 chips to 100,000 chips. The company also created a new technology committee led by Chief Executive Eddie Wu, with senior cloud and artificial intelligence executives on it, to speed development. (cnbc.com) A data center is the warehouse where artificial intelligence work gets done, and the chip inside it determines how much computing power a company can control. Alibaba has been trying to own more of that stack by designing chips, building cloud infrastructure, and selling its Qwen models through Alibaba Cloud. (alibabagroup.com) That push has been getting more expensive. On February 24, 2025, Alibaba said it would invest at least 380 billion yuan, about $53 billion, over three years in artificial intelligence and cloud infrastructure, a sum it said exceeded its total spending on those areas over the prior decade. (alibabagroup.com) The timing also lines up with tighter supply constraints for Chinese buyers. CNBC reported that United States restrictions on advanced semiconductor technology have pushed Chinese companies to build domestic alternatives, and Alibaba’s latest earnings release said its proprietary graphics processing units are now in scaled production for training, fine-tuning, and inference. (cnbc.com) (alibabagroup.com) At the same time, the world’s biggest contract chipmaker is still growing on the same artificial intelligence build-out. Taiwan Semiconductor Manufacturing Company said on April 10 that March 2026 revenue reached about New Taiwan dollars 415.19 billion, up 45.2 percent from a year earlier, while first-quarter revenue rose 35.1 percent to New Taiwan dollars 1.134 trillion. (tsmc.com) Those figures show two things happening at once: more companies are trying to use different chips, but demand for advanced chip manufacturing is still climbing. Alibaba’s cloud unit said on March 19 that cloud revenue rose 36 percent in the December quarter and that artificial intelligence-related product revenue posted triple-digit growth for a tenth straight quarter. (tsmc.com) (alibabagroup.com) The result is not a clean break from Nvidia so much as a wider field of suppliers, chip designs, and national strategies. Alibaba is putting its own silicon into live infrastructure, while Taiwan Semiconductor Manufacturing Company is still reporting record sales from the broader rush to build more of it. (cnbc.com) (tsmc.com)