Alibaba Scraps Cloud Unit Spinoff, Citing Washington’s Chip Curbs
SINGAPORE—Washington’s latest curbs on the export of high-performance chips to China are beginning to bite. Alibaba on Thursday said it had scrapped its plan to spin off and list its cloud-computing division, citing the impact of the export controls that took effect late last month. The restrictions “may materially and adversely affect" the cloud business’s ability to offer products and services and to perform under existing contracts, Alibaba said, adding that it would focus on the division’s growth.
The e-commerce and cloud service giant originally planned to hive off the business and target a listing by May 2024. That was part of a historic restructuring plan that would break the behemoth into six main business groups. Alibaba also Thursday said it has put on hold the initial public offering plan of its grocery arm Freshippo, blaming weak market conditions.
Falling stock prices, China’s sputtering economic recovery and geopolitical tensions have largely turned away foreign investors from Chinese IPOs. New listings in Hong Kong, where many Chinese companies come to list, raised just about $4.6 billion this year, down 58% from the same period last year and far below 2021 levels, according to Dealogic. Alibaba’s American depositary receipts fell nearly 9% in early trading Thursday.
The Biden administration has tightened restrictions on China’s ability to buy advanced semiconductors, especially artificial-intelligence chips, making it tougher for U.S. companies to sell existing products in China. The move was made to close perceived loopholes in export controls announced a year ago.
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