“Alibaba’s Stock Drops Over Cloud Spin-off Cancellation, U.S. Curbs”
Alibaba Group’s Hong Kong shares plummeted 10% due to scrapping its cloud business spin-off. The cancellation, prompted by U.S. export curbs on AI-related semiconductors, slashed $20 billion off its market value, the most significant single-day drop in over a year. The decision, announced late Thursday, sparked market shock across Asia. Nomura analyst Shi Jialong termed the cancellation a “negative surprise.”
Uncertainties over U.S. export curbs raised by Washington in October exacerbated concerns already voiced by Tencent Holdings earlier this week. Alibaba, once valued at $830 billion in October 2020, now stands at a quarter of that due to Beijing’s regulatory crackdown and China’s economic slowdown.
This move reflects broader challenges for Chinese tech companies, hindering access to essential chip supplies from U.S. firms. Initially planning a cloud business spin-off estimated at $41-$60 billion, Alibaba’s restructuring faced regulatory scrutiny over data management.
Alibaba’s quarterly earnings announcement also disclosed the postponement of Freshippo’s listing. The news of Jack Ma’s family trust intending to sell 10 million Alibaba shares added pressure on its stock value. Chairman Joseph Tsai emphasized their focus on cloud business growth and AI investment post-earnings.
While some analysts view the spin-off reversal as aiding Alibaba’s AI expansion amid concerns of the chip ban’s long-term impact, the company reported second-quarter revenue in line with analyst expectations. CEO Eddie Wu outlined a strategy shift, emphasizing independent market positioning for its businesses and distinguishing between “core” and “non-core” ventures. The firm plans to list Cainiao, its logistics arm, in Hong Kong and seek external funding for its international digital commerce unit housing Lazada and Alibaba.com.
