China’s Alibaba and Baidu have started using internally designed chips to train their AI models, partly replacing those made by Nvidia, The Information reported on Thursday, citing four people with direct knowledge of the matter.

Alibaba has been using its own chips for smaller AI models since early this year, while Baidu is experimenting with training new versions of its Ernie AI model using its Kunlun P800 chip, the report said.

Alibaba and Baidu did not immediately respond to Reuters requests for comment.

The move is a significant shift in China’s tech and AI landscape — where companies largely rely on Nvidia’s powerful processors for AI development — and would further dent Nvidia’s China business.

“The competition has undeniably arrived … We’ll continue to work to earn the trust and support of mainstream developers everywhere,” an Nvidia spokesperson said in response to the report.

Increasing U.S. export restrictions on supply of advanced AI chips to China have led Chinese companies to ramp up their own arsenal of AI chips, with growing pressure from Beijing on companies to use home-grown technology.

Neither Alibaba nor Baidu has fully abandoned Nvidia, the report said, with both companies using Nvidia chips to develop their most cutting-edge models.

While Nvidia’s H20 chip — the most powerful AI processor it is allowed to sell in China — does not have as much computing power as H100 or Blackwell series, it still outpaces Chinese alternatives in performance.

However, Alibaba’s AI chip is now good enough to compete with Nvidia’s H20, The Information said, citing three employees who have used the chip.

Meanwhile, Nvidia CEO Jensen Huang late last month said that the discussions with the White House to allow the company to sell a less advanced version of its next-generation chip to China will take time.

The company has struck a deal with U.S. President Donald Trump for export licenses in exchange for 15% of China sales of its H20 chips.