Following the announcement, the company's market value dropped by $21 billion.
Alibaba, one of China's largest technology companies,has scrapped plans to spin-off its cloud business, citing uncertainties created by U.S. export curbs on chips used in artificial intelligence applications.
Alibaba said that U.S. chip export curbs have “created uncertainties for the prospects of Cloud Intelligence Group,” which competes with Amazon Web Services and Microsoft Azure.
The day after the announcement, Alibaba's market capitalization fell from HK$1.65 trillion ($211.6 billion) to HK$1.49 trillion ($191 billion). According to CNBC analysts' calculations based on FactSet data, the company's market value collapsed by $21 billion.
Investors were hoping for a spun off entity for Alibaba’s cloud business that would achieve a higher valuation. Analysts in March estimated Cloud Intelligence Group could be worth between $41 billion to $60 billion, according to Reuters.
The U.S. decision last month to ban the export to China of more chips used in artificial intelligence (AI) has created major uncertainties for the country's big tech companies.
In March Alibaba unveiled plans to carve out the cloud business as part of the biggest restructuring in its 24-year history. The company was expected to create six independently run entities: Cloud Intelligence Group, e-commerce under Taobao-Tmall, Cainiao’s smart logistics operations, Local Services group, Global Digital Business Group, and the Digital Media and Entertainment Group.
The restructuring should help Alibaba diversify its risks and simplify compliance with the antitrust regulator's requirements, including in the area of algorithm control, Maria Belyaeva, an expert at the BRICS Competition Centre, said earlier.