Alibaba and Tencent are significantly increasing their investments in artificial intelligence, anticipating that domestically produced chips will alleviate current supply constraints. This accelerated spending occurs even as both companies face earnings below expectations this quarter.

Alibaba Group Holding and Tencent Holdings are doubling down on a massive artificial intelligence spending spree, betting that a new wave of Chinese-made chips will break the supply bottlenecks stifling their ambitions. While both Chinese tech giants saw revenues trail expectations this quarter, they pledged an aggressive acceleration in capital expenditure, as home-grown silicon from Huawei Technologies and Alibaba’s in-house labs begins to reach scale. Alibaba was likely to “overshoot” its...