Alibaba halts cloud computing spin-off due to US chip ban
Published: Nov 17, 2023 02:23 AM
Alibaba photo:IC

Alibaba photo:IC

E-commerce giant Alibaba said that it will no longer push for a complete spin-off of its cloud computing division due to multiple uncertainties brought by US export restrictions on advanced chips, according to its financial report on Thursday.

The group said it has decided to not proceed with a full spin-off, and instead will focus on developing a sustainable growth model for Cloud Intelligence Group.

The group also disclosed that the initial public offering (IPO) plan for its grocery arm Hema Fresh has been temporarily suspended and the group is assessing the market conditions.

Alibaba's US-listed shares fell 8.4 percent in premarket trading.

The shift in Alibaba’s restructuring plan comes after the US expanded export restrictions for advanced computing chips in October. The group said this could have a significant adverse impact on the could computing division.

“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 operations and financial condition,” Alibaba said in the financial report.

“These new restrictions may also affect our businesses more generally by limiting our ability to upgrade our technological capabilities,” it added.

In light of the market uncertainties, it is better for the division to remain with the parent group Alibaba and face the risks and challenges together, as it will receive more support, Liu Dingding, an expert in the tech industry, told the Global Times on Thursday.

This will also give it an upper hand in competing with other domestic rivals in the highly competitive domestic AI market, Liu added.

Observers said that the US' ill-intentioned moves will only motivate Chinese enterprises and research institutions in relevant sectors to step up their technological innovation, as the nation has already established solid tech foundations and is catching up.

China now has at least 130 large language models launched by companies including Alibaba and Tencent, accounting for 40 percent of the global total and just behind the US' 50 percent share, according to media reports.

In the quarter ended September 30, Alibaba’s revenue came in at 224.79 billion yuan ($30,810 million), an increase of 9 percent year-on-year