Alibaba Group faced a significant blow as its Hong Kong shares plummeted by 10% on Friday following the abrupt decision to abandon the spin-off plans for its cloud business. The company cited uncertainties arising from U.S. restrictions on semiconductor exports to China for artificial intelligence applications as the primary reason behind the U-turn. This dramatic market reaction, potentially marking its most substantial one-day fall in over a year, slashed approximately $20 billion off Alibaba’s market value. The move reflects the ongoing challenges Chinese tech companies face, with export curbs complicating access to vital chip supplies from U.S. firms. Alibaba, once Asia’s most valuable stock, has seen a sharp decline in value due to its central role in Beijing’s technology sector crackdown and the broader slowdown in the Chinese economy.
This unexpected shift in strategy follows Alibaba’s initial plan, announced in March, to carve out its cloud business as part of a major restructuring. The company, valued at around $830 billion at its peak in October 2020, is now worth less than one-fourth of that figure. The decision to halt the cloud business spin-off also coincided with the postponement of a listing plan for Alibaba’s Freshippo groceries business. Analysts had earlier estimated the cloud division’s value to be between $41 billion and $60 billion, with concerns about potential regulatory scrutiny. Despite these setbacks, Alibaba Chairman Joseph Tsai emphasized the company’s commitment to growing the cloud business and investing in artificial intelligence, particularly in light of the heightened importance of retaining the cloud unit amid surging demand for AI computing in China.