Alibaba Shares Plunged Over 7% After Cloud Service Called Off

Breaking!!

Shares in Chinese e-commerce giant Alibaba plunged over seven percent at the Hong Kong open on Friday following the company’s unexpected decision to cancel part of its high-profile restructuring due to the US-China chip war.

The Hangzhou-based tech company revealed that US restrictions on advanced chip exports compelled them to halt the spinoff of their cloud computing arm. This move surprised investors, causing the stock to drop 7.13 percent in Hong Kong, mirroring a decline in its New York-listed shares.

The decision was attributed to Washington’s ban on exporting powerful chips, crucial for artificial intelligence development, on national security grounds. Despite initial plans to split into six distinct entities, including a Cloud Intelligence arm, Alibaba opted out, stating that a full spin-off may not enhance shareholder value amid expanded US restrictions.

The company now aims to focus on developing a sustainable growth model for Cloud Intelligence Group in the face of fluid circumstances.

“Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under the fluid circumstances,” – Alibaba.

Alibaba, a key player in China’s digital economy, faces challenges from tightened domestic tech sector regulations and subdued consumer spending, recording its third consecutive quarter of single-digit revenue growth earlier this year.

The company, aspiring to achieve a more agile structure, acknowledges the impact of trade tensions with Washington on its business, making it one of the prominent Chinese firms affected by geopolitical dynamics.

Read Also:

• Stellantis Proposes Buyouts To 6,400 White-Collar Workers
• Huawei’s Chipmaker Gives Warning About Global Tensions Creating Chip Glut
• Exxonmobil Outperforms Tesla, Becoming The Most Shorted Stock In The Previous Month