Alibaba Chairman Joe Tsai warned of a potential spending bubble in artificial-intelligence spending and data-center construction, adding to market jitters about the sustainability of AI demand.

When Tsai said at a Hong Kong investor conference Tuesday that he is "astounded" by the capital spending of U.S. tech giants, he offered the latest example of how the competition in AI is becoming a geopolitical battlefield - especially when it comes to relations between the U.S. and China.

Earlier this week, Alibaba-backed Ant Group said it used Chinese-developed chips to train AI models at a 20% lower cost and with similar results to what Nvidia Corp. chips for the China market could have yielded, according to a Bloomberg report. And last year, Baidu Chief Executive Robin Li also warned of an AI bubble, saying that probably only 1% of the companies participating in the AI craze will stand out and "create huge value," while speaking at a Harvard Business Review conference.

The comments by Tsai at a Hong Kong technology conference, though, appeared to be having some impact on the market Tuesday, with some AI semiconductor stocks falling slightly. Nvidia Corp. $(NVDA)$ and Broadcom Inc. $(AVGO)$ shares were down fractionally, while Micron Technology Inc.'s stock $(MU)$ was off about 2%. Shares of Alibaba $(BABA)$ were down fractionally as well.

That said, Nvidia and other chip stocks moved higher in Monday's session even in the face of the Ant commentary.

Mizuho desk-based analyst Jordan Klein pointed out in a note to clients that investors should expect to see more and more "cautious comments" about AI coming out of China, as the AI narrative "becomes more of a global strategic arms race."

"Maybe Tsai and Alibaba [management] are not worried that Alibaba itself overspends or overbuilds in AI, just that their competitors will do so," Klein said. He flagged that Tsai's cautious remarks seemed at odds with Alibaba's own spending activity. Last month, Alibaba executives told analysts on the company's earnings call that they had plans to spend "more in cloud and AI over the next three years than we did in aggregate over the last 10 years."

Klein also pointed out that the comments from China were coming just days after Nvidia's big developer conference, GTC, during which the company made a slew of announcements and outlined an ambitious road map with plans to iterate a new line of chips roughly every 12 months.

"Less than a week after end of [Nvidia's] big splashy annual GTC event, we get repeated headlines out of China [from] tech internet leaders that are definitely negative shots against both Nvidia and the entire AI investment narrative that generally centers 100% on U.S. suppliers and tech company leaders," Klein said.

Still, it is worth noting that Nvidia's stock has suffered in the last two months since the revelation from DeepSeek, the small Chinese lab that demonstrated much lower costs of computing when creating its own AI model. Nvidia shares are still about 19% off their closing high achieved on Jan. 6, before the DeepSeek developments became widely known on Wall Street.

Chip stocks have also been volatile in recent months as investors have debated the potential impact of Trump administration tariffs, which now may not be as bad as expected. But there are other elements of the U.S.-China skirmish to consider, namely the prospect of stricter export controls over AI chips. Investors are wondering whether Trump will support the Biden administration's more stringent controls that are expected to kick in May 13 and could impact sales to more than just Greater China.