Alibaba Cancels Cloud Unit Spinoff Amidst US Chip Restrictions

Alibaba Group Holding announced on Thursday that it will cancel the spin-off of its cloud unit due to export restrictions imposed by the United States on chips used in artificial intelligence applications. In response to this news, Alibaba’s U.S.-listed shares decreased by approximately 5% during premarket trading. The company also reported second-quarter revenue that was in line with market expectations.

Alibaba stated that the recent expansion of U.S. restrictions on the export of advanced computing chips has created uncertainties for the future of its Cloud Intelligence Group. The e-commerce giant generated revenue of 224.79 billion yuan ($31.01 billion) in the quarter, slightly surpassing analysts’ average estimate of 224.32 billion yuan.

China’s economic recovery has been uneven, with the industrial and retail sectors performing better than expected, while the crisis-hit property sector continues to impact consumer confidence. In an effort to compete with rivals such as Douyin and PDD Holdings’ Pinduoduo, who offer lower-cost products year-round, Alibaba pressured merchants to aggressively price their goods during its Singles Day festival.

These quarterly results mark the first for CEO Eddie Wu, one of Alibaba Group’s co-founders and a long-time associate of former chief Jack Ma. Wu took over from former group chief executive Daniel Zhang in September.

Please note that the conversion rate is $1 = 7.2481 Chinese yuan renminbi. The article was reported by Akash Sriram in Bengaluru and edited by Sam Holmes and Arun Koyyur.