Alibaba Stock Soars on Reports of Listing of AI Chipmaking Unit T-Head

Alibaba stock (NYSE: BABA) is trading sharply higher in US price action today on reports that the company is moving forward with plans to spin off and list its specialized semiconductor division, T-Head (also known as Pingtouge). This strategic move follows a broader trend among Chinese tech giants to capitalize on the massive demand for domestic artificial intelligence (AI) infrastructure.

For years, T-Head operated primarily as Alibaba’s internal research and development powerhouse, designing custom silicon to boost the efficiency of Alibaba Cloud and its e-commerce platforms. However, under CEO Eddie Wu’s “AI-first” vision, the unit is being transformed into a standalone commercial entity.

Alibaba Plans to List T-Head

Alibaba will first restructure T-Head into an independent business with partial employee ownership. This is designed to align the interests of top-tier chip engineers with the company’s market performance.

Following the restructuring, Alibaba plans to launch an Initial Public Offering (IPO). While the exact timeline is still being finalized, the move is intended to tap into the “January boom” of tech listings currently sweeping the Hong Kong and mainland markets.

The primary catalyst for this IPO is the growing need for domestic alternatives to American-made chips. With tightening export controls on high-end Nvidia accelerators, T-Head has emerged as a frontrunner in the Chinese market.

T-Head recently showcased its Parallel Processing Unit (PPU), an AI accelerator designed for large-scale inference tasks. Reports indicate the PPU matches the performance of Nvidia’s H20 chip, the most powerful Nvidia GPU currently allowed for sale in China, but at roughly 40% lower production costs.

Alibaba Has Positioned Itself as an AI Play

The unit recently secured a significant deal with China’s second-largest wireless carrier to deploy its Pingtouge AI accelerators in a massive data center in northwestern China.

After their US rivals successfully pivoted to AI, Chinese tech companies are also following suit. Alibaba’s most recent quarterly earnings report paints a clear picture of the company’s aggressive, AI-driven transformation.

Alibaba’s cloud revenue jumped 34% year-on-year in fiscal Q2 2026, a significant acceleration from the previous quarter’s 26% growth. Management explicitly attributed this surge to soaring demand for AI computing, including AI model training and enterprise adoption of cloud-based AI services.

Revenue from AI-related products achieved triple-digit year-on-year growth for the ninth consecutive quarter, demonstrating that AI is not just a strategic talking point but a monetizable revenue stream for the company.

Alibaba Has Doubled Down on AI Capex

During the earnings call, Wu emphasized that the company is “in an investment phase to build long-term strategic value in AI technologies and infrastructure.” BABA has invested approximately 120 billion yuan in AI and cloud infrastructure over the past year. It has signaled that its initial commitment of 380 billion yuan over three years may be too conservative to meet surging customer demand.

Alibaba Says It is Seeing Strong ROI on AI Capex

Notably, while there have been concerns over tech companies’ ability to generate commensurate returns on their burgeoning AI capex, Alibaba said that it is seeing strong returns and is already breaking even on AI investments in its e-commerce business.

Alibaba vice president Kaifu Zhang, who heads the company’s e-commerce AI applications, told reporters in October 2025 that the company saw a 12% rise in advertising spend returns from AI-deployed tools, a “very rare” double-digit change that forecasts a “very significant positive impact” on the company’s Gross Merchandise Volume (GMV) during major shopping festivals.

BABA’s AI Glasses Went On Sale in November

Alibaba has launched two variants of the Quark AI glasses, whose mass sales began in China in November. The glasses function as a hands-free gateway to Alibaba’s AI and commerce ecosystem, enabling a variety of real-time functions like translation and online shopping. It also integrates other Alibaba apps like Alipay for visual payment verification and hands-free payment.

Alibaba’s launch intensifies the competition in the consumer wearable AI space, directly challenging products like Meta’s Ray-Ban smart glasses (which also run AI and feature integrated cameras). Chinese rivals like Xiaomi and Baidu have also released AI-based glasses.

Alibaba views this launch as a strategic move to extend its dominance from cloud computing and e-commerce into the next generation of consumer AI hardware, positioning the glasses as a “next-generation traffic gateway” to its platform.

Notably, the competition among major technology companies like Meta, Google, and the ecosystem surrounding OpenAI to dominate the nascent AI-powered smart glasses market is rapidly intensifying. This new wave of wearables is being positioned as the post-smartphone computing interface, with each company leveraging its core strengths from social media to AI models to secure an early lead.

Qwen Downloads Have Topped 700 Million

Notably, Alibaba’s flagship AI ecosystem, Qwen (often referred to as Qianwen in China), has surpassed 700 million downloads according to data from global developer platform Hugging Face.

This milestone cements Qwen’s position as the world’s most widely used open-source AI system, significantly outpacing major global competitors, including Meta’s Llama and OpenAI’s offerings.

China is Backing Its AI Companies

China is backing its tech companies amid the apparent tech war with the US.

In a major move to solidify its manufacturing prowess, China’s Ministry of Industry and Information Technology (MIIT) recently released a comprehensive action plan for the high-quality development of industrial internet platforms (2026–2028).

The plan is designed to bridge the gap between China’s massive industrial data and the burgeoning power of AI, aiming to cultivate “new quality productive forces” across the country’s manufacturing landscape.

China’s 15th Five-Year Plan (2026-2030) signals a strategic pivot from groundbreaking innovation (“zero-to-one”) to widespread application and scaling (“one-to-100”).

By standardizing and boosting industrial internet platforms, China aims to secure its supply chains against global volatility and ensure its manufacturing sector remains the most competitive and technologically advanced in the world.