Alibaba’s latest-generation artificial-intelligence processor, Zhenwu M890, has reached more than 650 external customers through Alibaba Cloud services across more than 20 industries, including autonomous driving, internet services and finance. The chip is part of a broader T-Head strategy to replace externally purchased processors with in-house hardware: T-Head has shipped 470,000 AI chips cumulatively, with more than 60% allocated to external customers. Alibaba management has identified greater T-Head deployment as a potential gross-margin and profitability lever, with gross margin recently at 34.5%. The Zhenwu M890 delivers roughly three times the performance of its predecessor while targeting cost-effectiveness. Alibaba and China Telecom have also established a joint AI data center initially equipped with 10,000 Zhenwu processors and designed to scale to 100,000. Alibaba Cloud Intelligence Group reported 38% year-over-year growth in external revenue in the latest quarter, while AI-related products represented about 30% of that revenue and the AI segment recorded triple-digit growth for 11 consecutive quarters. The company is shifting toward a model-as-a-service business that sells access to pre-trained AI models, as U.S. restrictions on GPU exports make advanced foreign chips harder and more expensive for Chinese technology companies to obtain. Alibaba has cautioned that chip and data-center investment creates costs before margin benefits emerge, weighing on overall group profits in the near term.