Alibaba, the Chinese e-commerce titan, witnessed an immediate 8% drop in its share price during early trading on the Hong Kong Stock Exchange. The plunge ensued shortly after the company announced the scrapping of its intended restructuring strategy to segregate its Cloud Intelligence Group business, responsible for overseeing cloud and artificial intelligence (AI) operations.
The reversal in plans was disclosed by Alibaba Group on Nov. 16, citing the implications of measures adopted by the US government to regulate the supply of chips crucial for AI applications.
The company highlighted the decision as a direct response to the US government’s prohibition on exporting AI chips to China, creating significant hurdles for Chinese enterprises in procuring chips from US suppliers.
In a statement addressing the sudden change in strategy, Alibaba stated, “The US chip ban has introduced a level of uncertainty regarding the trajectory of our Cloud Intelligence Group. This uncertainty has led us to reevaluate our strategy, and we believe that segregating the Cloud Intelligence Group business will not yield the desired shareholder value in the prevailing circumstances. Our immediate focus now shifts towards formulating a sustainable growth model for the Cloud Intelligence Group amidst this uncertain environment.”
The US had previously implemented restrictions, barring an Indian company from supplying its H800 and A800 AI chips to China back in October, amplifying the challenges faced by Chinese firms reliant on imported chip technology.
The swift and substantial decline in Alibaba’s share value underscores the tangible impact of regulatory decisions on the tech giant’s strategic planning and investor sentiment, emphasizing the intricate challenges posed by geopolitical regulations on global tech conglomerates.