Alibaba Stock Jumps 5% on 5-Nm Yitian 710 Chip Reveal

(CapitalWatch, Oct. 19, New York) The stock in Alibaba Group Holding Ltd. (NYSE: BABA; HKEX: 9988) rose an additional 5% by midday Tuesday, to $175.73 per share, continuing the rebound from recent lows, on news of the company's progress in chip design.

As Alibaba's annual Apsara conference launched Tuesday, the company unveiled its 5-nanometer processor chip designed in-house and custom-built for the company's data centers. Dubbed Yitian 710, the chip was developed by Alibaba's chip unit T-Head and is based on the architecture of the British chip giant Arm. The chips are not for commercial use, according to a company statement on its Alizila platform.

"We plan to use the custom-built chips to support current and future businesses across the Alibaba Group ecosystem," Jeff Zhang, president of Alibaba Cloud, said during the conference. "We will also offer our clients next-generation computing services with the new chip-powered servers through Alibaba Cloud in the near future."

The company did not disclose the foundry for its chip production, but its advanced 5-nm build suggests Taiwan Semiconductor Manufacturing Co. (NYSE: TSM), as explained on The Next Platform. So far, China's top foundry Semiconductor Manufacturing International Corp. (HKEX: 0981) remains behind its peers, with the 14nm chip in mass production and the 7nm chip in near-mass-production stage. The Korean giant, Samsung Electronics Co. Ltd. (OTC: SSNLF), is now also at 7nm production. Several companies are advancing toward their 5nm chip rollout – but TSM is the only one at mass production stage.

For Alibaba, the unraveling of Yitian 710 gave a nice boost on Tuesday, with BABA shares recovering to early-September level after hitting bottom of $138.43 two weeks ago. The tech giant has been battered by regulators this year and has lost a significant chunk of its market value since it traded at $305 a share at the same time last year.

Meanwhile, Arm, owned by Japan's SoftBank Group, is pending sale to Nvidia Corp. (Nasdaq: NVDA). Arranged last year, the $54 billion deal has not yet been finalized, pending antitrust approval from the European Commission. While Nvidia said it would maintain Arm as a neutral supplier in the competitive chip field, some industry players including Nvidia's U.S. rival Qualcomm Inc. (Nasdaq: QCOM) have voiced concerns.