News that the company would no longer spin off and list its cloud computing business wiped $20bn (£16bn) off its market capitalisation.
In a surprising U-turn, Chinese e-commerce giant Alibaba has revealed it will no longer go ahead with a plan to split its cloud service unit from the main business and take it public.
The announcement resulted in the company’s shares dropping 10 per cent, removing $20bn (£16bn) from Alibaba’s market value.
Alibaba said the decision was a result of the restrictions imposed by US curbs on Chinese exports of semiconductor technology used in artificial intelligence (AI) applications, which the company said could make it harder to upgrade its existing hardware.
“We believe that these new restrictions may materially and adversely affect Cloud Intelligence Group’s ability to offer products and services and to perform under existing contracts, thereby negatively affecting our results of operations and financial condition,” Alibaba said.
“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 multinational originally announced its plan to split into six separate units in what would have been the biggest restructuring in the company’s 24-year history.
The US has restricted China’s access to semiconductor technology since 2019, when the Trump administration banned Huawei from buying vital US technology. In August 2022, the US further prohibited the export of four technologies tied to semiconductor manufacturing, citing how they were “vital to national security” and signed a “historic” bill aimed at boosting the domestic production of semiconductors.
Last month, the Biden administration announced further restrictions that blacklist Chinese chip designers Moore Threads and Biren, and block the sale of a large range of advanced semiconductor technologies to 21 countries, including Iran and Russia.
The Alibaba announcement was published alongside the company’s third quarter revenue, in which it reported a 9 per cent year-on-year increase in revenue. CEO Daniel Zhang, who was set to take on the leadership of the Cloud Intelligence Group, quit the cloud business in September.
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