Jensen Huang scandal trail leads to Alibaba, the king of free Chinese AI: Chart of the Day

The cheapest way for an American company to run AI is a free model made in China. The scandal that just cost Nvidia its CEO could shut off the chips those models depend on.

Companies are making the switch fast. Duolingo (DUOL) co-founder and CEO Luis von Ahn said at Yahoo Finance Invest on Thursday that each AI practice call in his app used to cost about 30 cents. Now it’s “less than a cent,” he said, “by moving most of this to open weight models,” the kind of AI anyone can download and run for free. Decagon co-founder and CEO Jesse Zhang said new customers at his AI startup run “almost entirely” on them.

The most downloaded of those free models come from China, and the biggest maker by far is Alibaba (BABA).

Economist Nouriel Roubini says China’s edge rests on two shortcuts that are closing fast. Chinese open models are about 95% as good as American ones, the NYU Stern professor emeritus said at Invest, because “we allowed distillation — that’s over — and we allowed them through Singapore to get all these advanced chips.” Distillation is when one AI model learns by copying a stronger model’s answers.

Alibaba stock fell 7% Thursday to its lowest close since January 2025 as reports circulated that Washington is moving to shut down that Singapore route. The company reports earnings Nov. 19.

Alibaba’s AI is everywhere

Alibaba’s free AI models, called Qwen, get about half of the downloads that can be traced to a maker on Hugging Face, the biggest online library of AI models, by Yahoo Finance calculations. That’s more than twice as many as Google (GOOG, GOOGL), OpenAI (OPAI.PVT), Meta (META), Microsoft (MSFT), and Nvidia (NVDA) combined.

“Right now there is massive usage of … a Chinese family called Qwen, which is the most used one,” Hugging Face co-founder Thomas Wolf said on Deirdre Bosa Live this week.

Meta used to own this race. Its Llama 4 and Alibaba’s Qwen3 came out the same month in 2025. Developers have since downloaded Qwen3 more than 20 times as often on Ollama, a popular app for running AI on your own computer.

How the Nvidia scandal reaches Alibaba

Nvidia CEO Jensen Huang resigned Thursday after admitting to an affair with a woman US intelligence officials believe passed information to Beijing, according to reports. She has been identified as Alice Huang, a former executive at Megaspeed, a Singapore company that rents out computing power built on Nvidia chips.

Alibaba was Megaspeed’s founding customer and is still its biggest, the Financial Times reported. The US investigation targets Megaspeed, not Alibaba, and Megaspeed denies diverting chips.

China can’t legally buy Nvidia’s most advanced chips, so renting them abroad has been the workaround. Now the Commerce Department is finalizing a rule that would bar Chinese AI companies from using advanced chips in data centers outside China, including in Singapore and Malaysia, The Information reported.

The scandal also cost America’s open-source AI its loudest booster. “Jensen was a great champion for open weight,” Zhang said, adding that “there’s still a gap between the open-source frontier in the US and in China.” And China hawks in Washington now have an opening to press their case.

Roubini thinks Washington’s crackdown will flip that gap. Without copying American models and without the Singapore chips, he said, China’s AI makers are “going to lag behind us.”

Internal AI tools helped analyze interview transcripts, research, and draft this post. Humans reviewed, edited, and fact-checked this post before publication.

Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at [email protected].