What's Going On With Alibaba Stock Friday?

Alibaba Group Holding Limited BABA and its Chinese peers' artificial intelligence ambitions might face the brunt of the escalating U.S.-China geopolitical tensions manifesting as the West's advanced artificial intelligence technology embargo on its Asian counterpart. 

All of these are weighing on China's lackluster economy, fueled by the property crisis and the Israel-Gaza war.

The processing speeds of Alibaba and Baidu, Inc's BIDU most advanced AI chips fall within new thresholds disclosed by the U.S. this week. 

The sanctions will also force Nvidia Corp NVDA to halt shipments to China of two processors the Chip designer had made to bypass the earlier export controls, the Financial Times cites familiar sources.

Analysts expect the Chinese tech groups to resort to AI chipsets similar to Nvidia's V100 to train and run generative AI models, posing "an existential challenge" to China's efforts to catch up with AI development.

Washington has implemented controls on foundries in Taiwan and South Korea that produce chips for Chinese companies, leveraging the significant presence of American technology in the semiconductor supply chain. 

The revised rules increase the number of AI chips needing a license, effectively prohibiting their export and imposing restrictions on selling abroad to Chinese company subsidiaries. 

While major Chinese tech firms, including Alibaba, Baidu, ByteDance, and Tencent Holding Ltd TCEHY, have ordered over $5 billion in Nvidia chips, many of these orders remain undelivered. 

Washington has provided chip companies with a short grace period to complete orders to China. Despite expectations of some chips entering China via unofficial routes, the supply won't meet the high demand from tech companies.

Price Action: BABA shares traded lower by 1.51% at $81.38 premarket on the last check Thursday.