AMD’s Strategic Re-entry into the Chinese AI Chip Market

While its share price has shown modest movement recently, Advanced Micro Devices (AMD) may be on the verge of a significant strategic victory. Reports of a substantial order from Chinese tech giant Alibaba for specialized AI accelerators are injecting fresh optimism into the company's data center narrative, shifting focus to its potential in the global AI race.

For years, U.S. export controls severely limited the sale of high-end AI chips to China. A recent policy shift, however, appears to be creating an opening. AMD is reportedly in the final stages of negotiations with Alibaba to supply between 40,000 and 50,000 units of its MI308 accelerator.

This chip has been specifically engineered to comply with U.S. regulations while maintaining competitive performance for demanding AI workloads, particularly the inference of large language models (LLMs). The estimated value of this potential order stands at $600 to $700 million—a volume that would provide a meaningful boost to AMD's data center segment.

This opportunity stems from an adjustment to U.S. policy under the Trump administration, which now permits companies like AMD and Nvidia to export certain AI processors to China, subject to a 15% licensing fee paid to the U.S. government. Designed under these new rules, the MI308 is positioned as a "China-compliant" variant featuring 192 GB of HBM3 memory.

A key competitive detail: the chip is expected to be priced around $12,000, making it cheaper than Nvidia's H20 offering while providing greater memory capacity. This could give AMD a functional advantage in memory-intensive AI applications within this regulated market segment.

Key Details of the Potential Alibaba Agreement:

• Order Size: 40,000–50,000 MI308 accelerator units
• Product: Export-compliant AI chip with 192 GB HBM3 memory
• Regulatory Context: Supply permitted under revised U.S. Commerce rules, incurring a 15% license fee
• Competitive Positioning: Lower cost than Nvidia's H20, with superior memory for large models

Weighing Momentum Against Market Concerns

Despite the positive news flow, AMD's stock reacted with only slight negativity at the start of the week. Zooming out reveals a much stronger performance: the shares are up approximately 81% over the past twelve months and have gained about 83% since the beginning of the year. The stock currently trades not far from its 52-week high of $227.15 and remains well above all major moving averages.

Investors seem to be balancing two opposing currents:

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

1. The China Opportunity: Prior to export restrictions, China's data center market was estimated to contribute nearly a quarter of AMD's revenue. A partial reopening of this market, supported by tailored chips like the MI308, would provide structural tailwinds for 2026. A confirmed Alibaba order would also demonstrate that AMD can translate its "open ecosystem" strategy into concrete revenue within regulated markets, refusing to cede the field entirely to Nvidia's H20.

2. Pricing Pressure Worries: Concurrent rumors suggest both AMD and Nvidia may raise GPU prices in early 2026. While this would bolster margins, it could also dampen demand among non-hyperscaler customers, including small and medium-sized enterprises. This uncertainty is tempering short-term euphoria surrounding the China news.

AMD's AI Business Gains Definition

Throughout the current year, AMD has significantly expanded its AI portfolio. The company has ramped up production of its MI300 series and upcoming MI400 line, securing placements with major clients like Meta and Microsoft. A potential deal with Alibaba would represent another strategic piece in AMD's plan to close the gap with Nvidia in the data center segment, both technologically and commercially.

The regulatory easing acts as a lever on previous R&D investments. AMD had already invested in developing China-specific product variants but was long unable to fully monetize them due to restrictions. The adjusted export rules now make this research and development capital actionable once more.

Against this backdrop, analysts from major institutions maintain a fundamentally optimistic view. Some models project that China could contribute $4 to $6 billion to AMD's revenue in the coming fiscal year, provided the supply chain and political landscape remain stable.

Looking Ahead: Confirmation and Catalysts

The immediate focus now shifts to two key developments. First, the market awaits official confirmation of the Alibaba contract from AMD, along with further details on the framework of its China business operations. Second, attention turns to the upcoming Q4 earnings report, expected in early February 2026, which should provide a more concrete initial outlook for the year ahead.

From a technical perspective, the stock is trading near its highs, maintaining a significant distance above its 50-, 100-, and 200-day moving averages—a signal of a well-established upward trend. A confirmed major order from China, coupled with clear guidance on the GPU pricing environment, will be crucial in determining whether the strong share performance of recent months transitions into a new growth phase or enters a period of consolidation.