Alibaba Group’s market value took a staggering hit of $21 billion as it abandoned plans to spin off its cloud business, citing uncertainties over U.S. export curbs on chips used in AI applications.
The decision to reverse its cloud IPO, outlined during an earnings call, coincided with Alibaba’s decision to pause the listing plan for its Freshippo groceries business, a move triggered by a significant downturn in its shares.
The company’s Hong Kong shares nose dipped by 10%, marking the largest single-day drop in over a year, while the U.S.-listed securities closed down by 9%.
Alibaba’s woes stem from U.S. export curbs announced in October, prompting worries about chip supplies. Its market value plummeted from the peak in 2020, becoming a mere fraction of its former worth due to regulatory crackdowns in China and a slowing economy.
Chairman of Alibaba, Joseph Tsai, hinted at focusing on the cloud business and AI investments amidst concerns about chip restrictions affecting long-term operations. Despite challenges, some analysts view retaining the cloud unit as pivotal for Alibaba’s AI endeavors. The company also plans a strategic review to distinguish between ‘core’ and ‘non-core’ businesses, a move highlighted as positive by some analysts.
However, uncertainties linger as former CEO Jack Ma’s family trust considers selling shares, impacting market sentiment. Amidst these challenges, Alibaba remains determined to proceed with the IPO of its logistics arm, Cainiao, and is exploring external fundraising for its international digital commerce unit.