Hong Kong — Chinese technology stocks experienced a significant downturn on Friday, with Alibaba Group (HK:9988) (NYSE:BABA) at the forefront of losses. The e-commerce giant’s shares tumbled by 8.9% to a one-year low of HK$74.20 after it announced the suspension of its planned IPO for the cloud unit. Alibaba attributed this decision to the adverse effects of U.S. restrictions on chip exports to China.
Alibaba’s decline was the most pronounced on the Hang Seng index, which saw a 1.6% decrease.
Baidu Inc (HK:9888) (NASDAQ:BIDU) and Tencent Holdings Ltd (HK:0700), the other members of the BAT trio, also experienced losses of 3.5% and 1.8%, respectively.
In a statement on Thursday, Alibaba cited the uncertainty surrounding the supply of chips, crucial for artificial intelligence development, as the reason for abandoning the demerger of its cloud business.
This move follows the recent expansion of U.S. chip export restrictions on China, escalating tensions in trade relations between the two largest economies. In retaliation, China curtailed the export of key materials used in battery manufacturing and electronics.
Alibaba, in the midst of developing its in-house generative AI with the cloud unit at its core, faces a setback due to the lack of access to the latest chips, particularly from NVIDIA Corporation (NASDAQ:NVDA), which recently introduced the H200, a flagship graphical processing unit for AI applications.
The U.S. export restrictions also impact Baidu and Tencent. Earlier in the week, Tencent cautioned that these curbs would likely affect its cloud business, revealing it had stockpiled Nvidia chips while exploring Chinese alternatives.
Despite the broader decline in Chinese tech stocks, Alibaba’s substantial losses stem from various factors. While the company’s Q3 earnings met expectations, its primary market, China, exhibited limited signs of improvement. Alibaba also halted plans for an IPO of its Freshippo groceries arm, compounding challenges to its strategy of splitting into six separate entities.
In response to the selling pressure, regulatory filings on Thursday disclosed that Jack Ma’s family trust intends to sell 10 million American Depository Receipts of Alibaba for approximately $871 million, leading to a 9% decline in Alibaba’s ADRs on Thursday.
Amidst these challenges, Alibaba affirmed its commitment to external fundraising for its international e-commerce unit, signaling determination to navigate the current headwinds.
