An opinion piece in China’s state-backed Global Times on September 14 called Anthropic CEO Dario Amodei’s proposal to pace frontier AI a “Cold War playbook” aimed at China. On September 11, Chinese model developer Z.AI also launched roughly $5 billion of share and convertible-bond sales to fund models and computing infrastructure. The clash reaches Alibaba Group Holding Limited (NYSE:BABA) and NVIDIA Corporation (NASDAQ:NVDA): Alibaba is funding China’s AI stack, while Nvidia says export controls have largely shut it out of China’s data-center compute market.
Industry leaders have argued that frontier development may need to slow as AI accelerates AI research itself. But an American slowdown only works if rivals face the same incentives. President Donald Trump has rejected calls to slow U.S. AI development, arguing that whoever wins AI wins the strategic contest with China.
The Global Times commentary came after President Trump’s. The whole thing is very game-theoretic. U.S. labs may collectively prefer a slower race, but each risks losing ground if any competitors inside the country keep scaling. China then adds another layer: even perfect coordination among American labs could transfer relative advantage to Chinese developers unless Beijing joins an enforceable arrangement.
China Is Still Funding the Race
Z.AI’s financing signals Chinese developers have strong incentives to accelerate while U.S. labs debate restraint.
Alibaba Group Holding Limited completed an HK$80 billion, roughly $10.2 billion, Hong Kong share placement on August 26 to finance chips, infrastructure and model development. Its August 20 results gave investors a reason to tolerate the dilution: AI Cloud and Compute Services revenue rose 45% to $7.1 billion, while cloud adjusted EBITA increased 133%. Alibaba could benefit if competition pushes China toward faster self-sufficiency.
Source: unsplash
The bear case is that this is becoming an expensive arms race under geopolitical constraint. U.S. officials accused Alibaba and other Chinese labs on September 8 of illicit model distillation, allegations China rejected. More restrictions could raise Alibaba’s compute costs or slow access to frontier hardware. Insider Monkey’s database showed 97 hedge funds with reportable BABA long positions in Q2 2026, down from 102 in Q1. Fisher Asset Management trimmed its common-share position by 1%. The filings, of course, predate the slowdown debate.
Nvidia’s China Problem Cuts Both Ways
When it comes to NVIDIA Corporation, its sitting at the choke point. Amodei’s answer is to widen the U.S. lead first by restricting advanced chips and semiconductor equipment, creating enough strategic cushion for American labs to pace themselves later.
That creates an odd Nvidia trade. Stricter controls could help preserve the U.S. frontier while sacrificing China revenue and helping domestic Chinese chip ecosystems develop. The company’s latest 10-Q says it was effectively foreclosed from China’s data-center compute market at the end of its fiscal second quarter, and that limited H200 shipments were less than 1% of quarterly Data Center revenue. Tighter controls could therefore protect U.S. technology leadership while also surrendering a huge market to domestic Chinese competitors.
The bull case is that demand outside China can absorb the loss, while policy may slow Chinese rivals. The bear case is written plainly in Nvidia’s own filing: exclusion from China helps competitors build developer and customer ecosystems that can challenge it worldwide. Insider Monkey tracked 285 hedge funds long Nvidia in Q2, up from 275 in Q1; Fisher Asset Management increased its shares 3%. As of August 31, 298.30 million Nvidia shares were sold short, 1.29% of float, with 2.1 days to cover.
For investors, the policy fight is not abstract. Alibaba benefits if China responds by financing self-sufficiency faster. Nvidia benefits if controls preserve its technological lead without permanently creating a rival ecosystem beyond its reach.
While we acknowledge the potential of BABA and NVDA as investments, we believe certain other AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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