Chip war nixes Alibaba’s plan to spin out cloud business
US controls on chip exports to China have constrained Alibaba’s plans to spin off its cloud computing business, sending its stock tumbling. Alibaba said that the controls had created “uncertainties” for the division’s future.
Chinese President Xi Jinping and US President Joe Biden held crucial talks just hours ago that seemed to set the world’s top two economies on a more stable path.
The new US restrictions will affect Cloud Intelligence Group’s ability to operate materially and adversely, affecting profitability and casting doubt on the value of a separate listing.
During Friday’s trading session in Hong Kong, Alibaba’s shares fell nearly 10%, wiping about $20 billion off the company’s market value.
The company stated that it would focus on developing a sustainable growth model for Cloud Intelligence Group under the current circumstances. We may also be limited in upgrading our technological capabilities due to these new restrictions.”
The chip war between the United States and China has forced Alibaba to rethink its plan to list its cloud unit as a separate company.
As a result of the dispute, China has gained access to the most advanced semiconductors, as well as the materials and equipment needed to create the components used in products such as smart phones and medical equipment.
American companies are no longer allowed to sell semiconductors to China under sweeping export controls introduced a year ago by the US government.
A senior US official said Xi described the restrictions as “technological containment” during his talks with Biden Wednesday. As a response, Biden said that the United States won’t provide China with technology that could be used against it by the Chinese.