AMD Shares Gain on Potential Major Order from Chinese Giant Alibaba

A recent report suggesting a substantial AI chip purchase by Chinese e-commerce leader Alibaba has provided a lift to Advanced Micro Devices (AMD). The news has drawn investor attention to the U.S. semiconductor firm's strategic positioning in a key, albeit regulated, market. In quiet post-holiday trading, AMD's stock held steady above the $215 level, prompting questions about whether this deal could meaningfully strengthen the company's foothold in China.

At the heart of the potential agreement is AMD's MI308 AI accelerator, a chip specifically designed to comply with U.S. export controls on advanced hardware destined for China. Reports indicate Alibaba is considering an order for approximately 40,000 to 50,000 of these units. The MI308 is positioned as a powerful alternative to Nvidia's H20 chip, operating within the performance limits set by Washington.

Key details of the prospective deal include:

• Quantity: 40,000–50,000 MI308 accelerators
• Estimated Unit Price: Around $12,000
• Potential Total Value: Up to $600 million
• Regulatory Consideration: A 15% licensing fee payable to U.S. authorities on the chips

This move represents a targeted effort by AMD to capture growth in a constrained but high-demand segment, directly addressing the needs of Chinese tech firms to expand their data center capacity for generative artificial intelligence.

Challenging the Dominant Player

The potential Alibaba order underscores AMD's broader strategy to challenge Nvidia's current dominance in the AI accelerator market. Industry estimates suggest the MI308 is priced roughly 15% below comparable Nvidia offerings. Beyond the price differential, the strategic significance is profound: securing a mandate from a hyperscaler like Alibaba would validate AMD's approach of developing region-specific, sanctions-compliant product versions.

Should investors sell immediately? Or is it worth buying AMD?

The MI308 chip is reported to feature 192 GB of HBM3 memory, making it particularly suitable for running large language models (LLMs). A successful deal with Alibaba could serve as a powerful reference case for other Chinese cloud and internet giants, such as Tencent or Baidu, which are also aggressively building out their AI infrastructure.

Market Reaction and Broader Context

Trading activity has been subdued following the Christmas holiday, with AMD shares fluctuating between $213.97 and $216.54 during the session. The stock's current level near $215 remains well above its 52-week lows. The muted price movement aligns with typically low liquidity during holiday periods, resulting in a moderate market response despite the positive news.

Nevertheless, the strategic implication is clear. With the MI308, AMD has deployed a precisely calibrated product to serve AI demand in regulated markets like China, aiming to reduce those regions' dependency on U.S. and European supply chains.

Implications for Future Growth

Finalizing an agreement of this scale would come at a critical juncture for AMD. The company's data center business currently serves as its primary growth engine, offsetting softer performance in other segments. An order worth up to $600 million would provide visible support to segment revenues while sending a strong signal to other potential customers within the Chinese market.

AMD's market valuation stands at approximately $350 billion, reflecting its status as the most credible alternative to Nvidia in the AI accelerator space. A confirmed Alibaba contract would further cement this positioning and could contribute meaningfully to data center revenue growth in upcoming quarters.