Alibaba Group Holding’s planned Hong Kong listing of its semiconductor design arm, T-Head, is poised to reshape China’s artificial intelligence hardware arena while unlocking billions of dollars in trapped valuation for the tech titan, according to analysts.
The proposed spin-off serves as a test of whether the sum of Alibaba’s parts is worth significantly more than its current market valuation. Alibaba’s Hong Kong-listed shares slipped about 1 per cent to HK$100.60 on Wednesday, the day following the announcement.
“The chip business was previously hidden within Alibaba Cloud and difficult to price independently,” said analysts at Chinese financial data provider Wind, in a research note on Wednesday. “Once listed separately, it becomes a new yardstick for whether Alibaba is undervalued.”
T-Head is one of the first Alibaba stand-alone units to pursue an initial public offering (IPO) in the last few years, and represents a major public-market pricing test for a Chinese AI hardware infrastructure provider.
Alibaba owns the South China Morning Post.
T-Head is seeking to raise between US$2 billion and US$3 billion, Reuters reported earlier this week. If achieved, that sum could surpass the combined proceeds raised by domestic makers of graphics processing units Biren Technology and Iluvatar CoreX, which listed in Hong Kong earlier this year, according to Wind analysts.
The injection of independent funding would relieve pressure on Alibaba’s balance sheet, analysts said.
Founded in 2018, T-Head remains closely tied to Alibaba Cloud and has relied heavily on profits from the group’s core e-commerce business. Last month, Alibaba chairman and co-founder Joe Tsai said that the company was using US$25 billion in free cash flow generated by its online shopping operations to fund AI infrastructure and model development.
“We believe the spin-off can unlock the value of T-Head and allow it to access capital independently,” said Jefferies analysts Thomas Chong and Zoey Zong on Wednesday, adding that the transaction would help investors “better assess and value the retained group” while pricing T-Head “on its own merits”.
Listings by Chinese chip companies underscore an accelerating drive towards domestic semiconductor self-sufficiency backed by private capital. The trend comes amid intensified anxiety over China’s future access to advanced silicon amid heightened scrutiny following Nvidia CEO Jensen Huang’s affair and an expected post-midterm push in the US Congress for stricter trade policies.
In-house chip design could provide Alibaba with a degree of strategic insulation against growing headwinds.
T-Head “mitigates this risk and differentiates Alibaba from Chinese hyperscalers more reliant on external supply”, Morgan Stanley analysts said in a research note on Wednesday.
A key pillar expected to underpin T-Head’s valuation is the commercialisation progress of its flagship AI processors, particularly the Zhenwu M890 and the latest V900.
Unveiled in September and billed as “the most powerful AI chip in China today”, the V900 was said to deliver three times the performance of its predecessor.
Alibaba claimed a computing cluster powered by the V900 could link up to 500,000 chips to handle both training and inference for frontier AI models. Mass production and commercial availability were scheduled for the first quarter of 2027. -- SOUTH CHINA MORNING POST
