Alibaba announced Wednesday that it will integrate Nvidia’s AI development tools for robotics, autonomous driving, and smart spaces directly into its Cloud Platform for AI – a major partnership to push the boundaries of applied AI.
The partnership extends Nvidia’s dealmaking blitz, following its pledge to stake $5 billion in Intel and a headline-grabbing $100 billion investment in OpenAI.
At the heart of the deal is Nvidia’s Physical AI software stack, a system designed to construct 3D digital twins of real-world environments. These replicas generate synthetic training data for robotics, self-driving vehicles, or connected industrial spaces such as warehouses and factories.
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While financial terms were not disclosed, the collaboration is strategically weighty. It unites the world’s leading supplier of AI-optimized chips with one of Asia’s most important cloud and AI infrastructure players, underscoring how both companies are racing to entrench themselves deeper in the global AI ecosystem.
The partnership is part of Alibaba’s broader pivot toward AI as it seeks to complement and diversify its e-commerce core. The company said Wednesday it is surpassing its previous $50 billion budget for AI investments, signaling its most aggressive expansion yet.
New initiatives include building data centers in Brazil, France, and the Netherlands—marking its first physical AI cloud infrastructure presence in Latin America and a strengthened foothold in Europe. Across the board, Alibaba now operates 91 data center locations across 29 regions, making it one of the fastest-expanding global cloud players.
The company also unveiled the latest in its in-house language model family, Qwen 3-Max, which it describes as its most advanced to date. Trained on 1 trillion parameters, Qwen 3-Max is optimized for coding and agentic tasks, a signal that Alibaba is not just competing on infrastructure but also on core model development.
For Nvidia, the Alibaba deal adds another high-profile alliance to a string of bold investments and partnerships that highlight its expanding role in shaping the AI industry. Its recent decisions to invest billions in Intel and OpenAI reveal a strategy that goes beyond supplying GPUs to actively steering the AI ecosystem.
The deal with Alibaba complements that vision by embedding Nvidia’s Physical AI stack into one of the largest non-U.S. cloud ecosystems. This not only extends Nvidia’s software reach but also strengthens its grip on the Chinese and global AI development market—particularly in applied AI domains like robotics, autonomous vehicles, and industrial automation.
Beijing’s Clampdown on Nvidia Chips
The timing, however, adds a layer of uncertainty. The Alibaba partnership comes as Beijing steps up its restrictions on Chinese companies’ use of U.S.-designed chips. Earlier this month, The Financial Times reported that the Cyberspace Administration of China (CAC) instructed leading firms—including TikTok parent ByteDance and Alibaba itself—to halt testing and orders of Nvidia’s RTX Pro 6000D, a GPU tailored specifically for the Chinese market.
According to the report, the directive not only froze new purchases but also required the cancellation of existing orders. This was seen as Beijing flexing its control in response to Washington’s export bans on high-performance GPUs such as the A100 and H100, which U.S. officials argue could be used for military and surveillance purposes. Nvidia responded by creating modified versions like the A800, H800, and RTX Pro 6000D, designed to comply with U.S. export rules while still serving Chinese clients.
But Beijing’s latest clampdown raises the risk that even these compromise chips may be swept into wider restrictions, further complicating Nvidia’s position in China. Against this backdrop, there is concern that Beijing may expand its scrutiny to additional Nvidia products, potentially impacting the very partnership now being celebrated with Alibaba.
However, the Nvidia–Alibaba deal reflects a broader race among tech giants to dominate the applied AI layer, where foundational models meet practical applications. But the partnership with Nvidia offers a powerful foothold in China’s AI ecosystem without directly relying on restricted hardware sales. For Alibaba, leveraging Nvidia’s Physical AI stack accelerates its ability to compete globally against Microsoft Azure, Google Cloud, and Amazon Web Services.
Yet the geopolitical headwinds cannot be ignored. Washington has steadily tightened restrictions on Nvidia’s most advanced GPUs, while Beijing appears intent on limiting domestic reliance on American-designed silicon altogether. If China extends its bans to additional Nvidia chips, it could chill the momentum of collaborations like the one with Alibaba—even if the partnership is primarily software-driven.