China’s Alibaba is not spinning off its cloud business into a separate company after all. The e-commerce and tech giant announced this recently. This decision immediately cost the company as much as 18 billion euros ($20 billion) in stock market value.
Chinese e-commerce company Alibaba has decided not to pursue the spin-off plan for its cloud activities. The company blames this on recent US export restrictions on high-end chips.
These export restrictions would create a lot of uncertainty for investors in the new company, Alibaba indicates. Therefore, a decision has been made not to proceed with the spin-off for the time being, according to the statement in its third-quarter results for 2023.
Stock market value sharply down
The announcement caused a 10 percent fall in Alibaba’s stock price on the Hong Kong stock exchange. This price drop caused the e-commerce giant’s stock market value to fall by as much as $20 billion, Reuters writes.
The spin-off of Alibaba’s cloud business was announced in March of this year. The plan was to break up the entire group into six separate parts. At the time, the value of the cloud business, such as Alibaba Cloud, was still estimated between $41 billion and $60 billion.
Investing more in AI
Alibaba announced other plans and says the Chinese company will focus more on strengthening its cloud business and AI solutions and applications. Experts say that Alibaba’s retention of its cloud business may also have to do with its ambitions in this area.