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Alibaba and Baidu Turn to In-House Chips for AI Training Amid U.S. Restrictions

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Alibaba and Baidu have begun using their own internally designed chips to train AI models, partly replacing Nvidia’s processors, according to a report from The Information. The move signals a major shift in China’s AI development strategy, as U.S. export controls continue to restrict access to advanced American-made semiconductors.

Key Developments

  • Alibaba has used its homegrown chips since early 2025 to train smaller AI models.

  • Baidu is testing its Kunlun P800 chip to train new versions of its Ernie AI model.

  • Both companies still rely on Nvidia for their most advanced models but are working to reduce dependence.

Impact on Nvidia

Nvidia remains dominant in AI training hardware, but China accounts for a large share of its business. The firm’s most powerful U.S.-approved chip for China, the H20, lags behind the H100 and Blackwell series — but still outperforms most Chinese alternatives.

However, employees cited by The Information said Alibaba’s latest AI chip matches the performance of Nvidia’s H20, narrowing the gap between U.S. and Chinese hardware.

An Nvidia spokesperson responded: “The competition has undeniably arrived … We’ll continue to work to earn the trust and support of mainstream developers everywhere.”

Geopolitical Pressure

  • U.S. export restrictions have pushed Chinese companies to accelerate domestic chip design.

  • Beijing has urged firms to rely on home-grown semiconductor technology as part of its strategic autonomy push.

  • Nvidia CEO Jensen Huang recently said talks with the White House over permission to sell a less advanced next-gen chip to China will take time.

According to the report, Nvidia has agreed to give the Trump administration 15% of China sales of its H20 chips in exchange for continued export licenses.

The Bigger Picture

China’s pivot toward domestic AI chips marks both a risk to Nvidia’s China revenues and a milestone for Chinese chipmakers, who are beginning to close the performance gap under intense geopolitical and economic pressure.

Xiaomi to Launch Self-Developed XringO1 Mobile Chip in Late May

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Xiaomi is set to unveil its latest in-house mobile chip, the XringO1, in late May, marking a renewed push into proprietary silicon development as competition heats up in China’s smartphone market. The announcement came from CEO Lei Jun on Weibo, though technical details remain limited.

Key Developments:

  • The XringO1 chip was reportedly built using ARM architecture and manufactured by TSMC using its advanced 3-nanometer (3nm) node — currently one of the most cutting-edge fabrication processes.

  • This move signifies Xiaomi’s return to high-end chip design, following earlier efforts like the Pengpai S1 in 2017, which was ultimately discontinued due to cost and complexity.

  • Xiaomi had since shifted focus to image sensors and power management ICs, but resumed processor development in 2021, according to sources familiar with the project.

Strategic Significance:

The launch positions Xiaomi to compete more directly with Apple and Huawei, both of which use custom-designed chips to drive hardware-software integration and performance optimization:

  • Apple has long utilized its own A-series and M-series chips, creating a tightly controlled ecosystem.

  • Huawei, despite U.S. sanctions, has pushed ahead with its Kirin chip series via SMIC.

Xiaomi’s goal is to use the XringO1 chip in its premium smartphones and tablets, potentially phasing in custom silicon to reduce dependency on foreign suppliers such as Qualcomm, which remains Xiaomi’s primary chip partner.

Market & Political Context:

  • The Xiaomi 15 Ultra, launched earlier this year, uses Qualcomm’s Snapdragon 8 Elite, but future models could see a transition to Xiaomi silicon.

  • While U.S. export restrictions now limit TSMC’s ability to produce AI chips for Chinese clients at advanced nodes, smartphone chips — such as XringO1 — are currently exempt from those restrictions.

Xiaomi ranks as the world’s third-largest smartphone manufacturer, and its expansion into EVs, home appliances, and AI devices makes chip autonomy increasingly strategic.

Neither Xiaomi nor Qualcomm responded to requests for comment at the time of reporting.