Alibaba is implementing a new AI chip to enhance its cloud functionality, increasing the race to AI in China and further shifting its dependency to U.S. technology.

Alibaba, the biggest Chinese cloud-computing firm, has unveiled a new AI chip that would decrease its dependence on American technology and deal with regulation challenges affecting Nvidia. The migration shows that China is increasingly making efforts to increase its cloud and AI sectors, as the government is accelerating in trying to keep pace with the U.S. in the world AI competition.

The chip is currently in testing and aimed at a broader assortment of AI inference workflows than previous Alibaba processors. This chip is also being domesticized, contrary to its predecessors, since before it was largely dependent on Taiwan Semiconductor Manufacturing Company (TSMC), which the U.S. restrictions have prohibited from making improved AI chips in China.

The progress is in line with a larger national trend in China’s cloud ecosystem, with firms such as MetaX, Cambricon Technologies, and Huawei aiming to develop analogue alternatives to the high-end processors of Nvidia. MetaX has already indicated that it is planning to produce its H2O-substitution chip in mass production and that Huawei demonstrated the demonstration of a powerful system of computers that builds hundreds of its Ascend chips into it.

With the acceleration of competition, the cloud department at Alibaba should be a significant factor in applying these chips to promote AI applications and cloud computing. Industry analysts warn that this may boost the capabilities of the cloud infrastructure of China but indicates that the company has a long way to go before it can match the technological power of rivals in the U.S.