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The US expanded its chip restrictions to China last month, which has caused ‘uncertainties’ for the prospects of Alibaba’s cloud division.
Chinese e-commerce giant Alibaba has suffered a share price plunge, after it revealed that it will not spin off its cloud business due to ongoing trade restrictions with the US.
Alibaba revealed plans earlier this year to split its business into six separate units to increase value for shareholders and avoid anti-competition regulatory pressures. This announcement caused Alibaba’s share price to rise significantly, due to the belief that the massive change would allow the different units to respond to market needs quicker.
But that plan has taken a hit from the new announcement. In its latest earnings report, Alibaba said the recent expansion of US chip restrictions has created “uncertainties” for the prospects of its Cloud Intelligence Group.
“We believe that a full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,” Alibaba said in the report. “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.”
The Alibaba Group share price has tumbled by nearly 10pc since the announcement, according to stock information shared by the company.
Last month, the US issued a fresh batch of restrictions on the export of AI chips as part of an ongoing trade war with China. The new restrictions were a follow-up to the restrictions on advanced chip exports that were introduced last year to China and other countries.
The US said the restrictions aim to prevent advanced hardware being deployed for military use by countries such as China and Russia. The updated restrictions were implemented to prevent loopholes designed to evade the initial restrictions, according to US officials.
The updated rules impacted the Nvidia H800 chip, which was designed to get past the earlier trade restrictions that impacted its ability to sell the H100 to China, according to a Reuters report in March.
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