When Alibaba (9988.HK, BABA.US) saw its share price surge by over 50% on reports it could produce artificial intelligence chips comparable to Nvidia's (NVDA.US) H20, the concept appeared compelling. However, this narrative seems to have run its course, and Alibaba will likely revert to its previous state, as the so-called capability to produce high-end chips remains merely conceptual. When such concepts fail to materialise in practical applications, they transform into bubbles that quickly burst.
Why is Alibaba's production of high-end AI chips a bubble? Perhaps we should recall how DeepSeek's emergence earlier this year captivated everyone, yet today, does DeepSeek still represent China's pride in AI models? According to China's Quest Mobile website's "2025 Q2 AI Application Value Ranking", DeepSeek's average monthly downloads in mainland China plummeted from 81.113 million in Q1 to just 22.589 million in Q2, a 72.2% decline. This shows DeepSeek's momentum faltered after less than three months.
