Alibaba Cancels Spinoff for Cloud Computing Division Due to Export Controls Uncertainty

Chinese e-commerce company Alibaba is nixing plans to spin off its cloud computing division due to “uncertainties” caused by recently updated U.S. chip export controls on China. Alibaba was planning to publicly list its Cloud Intelligence Group, a cloud computing services business, but said last week it fears “these new restrictions may materially and adversely affect” the cloud computing division’s “ability to offer products and services and to perform under existing contracts.”

The company believes a “full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,” it said in a news release announcing its latest financial results. “Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under the fluid circumstances.”

The company added that the new controls “may also affect our businesses more generally by limiting our ability to upgrade our technological capabilities.” The new U.S. rules include a new end-use control for certain Chinese-headquartered cloud or data server providers located outside of China (see 2310170055), and the Commerce Department also sought public comments on the best way to address Chinese companies using cloud computing services to undermine export controls, including through rental agreements (see 2310100023, 2303210037 and 2305160092).