Alibaba Market Jolt: In a market-shaking move, Alibaba Group’s (9988.HK) Hong Kong shares tumbled 10% after abandoning the cloud business spin-off, citing uncertainties from U.S. curbs on semiconductor exports to China. The abrupt strategy reversal wiped approximately $20 billion off the tech giant’s market value, marking a potential one-day fall not seen in over a year.
Alibaba’s concerns over U.S. export restrictions, announced in October, align with broader challenges faced by Chinese tech companies struggling to secure essential chip supplies. Once valued at around $830 billion, Alibaba’s current valuation stands at less than one fourth, reflecting the company’s prominent role in Beijing’s technology crackdown and the economic slowdown in China.
The decision to halt the spin-off, part of Alibaba’s extensive restructuring announced in March, reflects the hurdles faced by Chinese tech firms. Analysts had previously estimated the cloud division’s value at $41-$60 billion, cautioning about regulatory scrutiny due to the vast amount of data it manages.
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Alibaba Chairman Joseph Tsai, addressing the post-earnings call, emphasized a renewed focus on growing the cloud business and investing in artificial intelligence (AI) initiatives. The move, while impacted by U.S. chip bans, underscores Alibaba’s commitment to meeting the surging demand for AI computing in China.
Despite Alibaba’s strategic shifts, news of Alibaba co-founder Jack Ma’s family trust planning to sell 10 million American Depository Shares could impact sentiment, according to UBS analyst Kenneth Fong.
Alibaba reported second-quarter revenue in line with analyst expectations, totaling 224.79 billion yuan ($31.01 billion). The company outlined a future strategy of conducting strategic reviews to distinguish between “core” and “non-core” businesses. Plans for a listing of Alibaba’s logistics arm, Cainiao, and external fundraising for the international digital commerce unit, housing platforms like Lazada and Alibaba.com, remain in progress amidst the evolving landscape.