Alibaba, a big online shopping company in China, lost $20 billion in its value when it said it wouldn’t separate and list its cloud computing business. This company, like Amazon in the U.S., decided not to go through with plans to make its Cloud Intelligence Group a separate business. They pointed to rules in the U.S. about selling advanced computer chips as the reason for this decision.
Alibaba thinks these rules make it uncertain for the future success of the Cloud Intelligence Group, which competes with services from Amazon, Microsoft, and Google. Instead of the separation plan, Alibaba’s CEO, Joe Tsai, said they will work on growing the cloud computing services by focusing on new demand for artificial intelligence (AI) and big-scale networked services.
In separate filings to the U.S. Securities and Exchange Commission, Alibaba also revealed that two private holding vehicles tied to the family trust of co-founder Jack Ma plan to dispose of almost $900 million worth of Alibaba shares. Ma is currently China’s sixth-richest billionaire with a net worth of $25.1 billion, according to Forbes estimates.
Alibaba Loses Value and Concerns Over Cloud Business Plans
On Thursday, when the Hong Kong stock market closed, Alibaba’s total value was 1.65 trillion Hong Kong dollars ($211.6 billion). By Friday, it dropped to 1.49 trillion Hong Kong dollars ($191.1 billion). This means Alibaba lost about $21.1 billion in its total value, based on calculations.
Alibaba’s shares on the Hong Kong stock exchange have fallen nearly 15% since the beginning of the year, performing worse than the overall Hang Seng index, which went down by 11.2% during the same period.
Investors wanted Alibaba’s cloud business to become a separate company because they thought it would be worth more. Analysts in March guessed that the Cloud Intelligence Group could be valued between $41 billion to $60 billion, as reported by Reuters.
But some people who talk about the stock market had cautioned that if Alibaba listed this part of the business, it might face close examination from regulators in China and other countries. This situation shows that Alibaba, a major tech company in China, has now become part of the tense international tensions between the U.S. and China.
Alibaba’s Strategic Investment in Artificial Intelligence
Alibaba is putting a significant amount of money into artificial intelligence to stay competitive with U.S. counterparts like Microsoft, Google, Meta, Amazon, Apple, and the Microsoft-backed company OpenAI. The goal is to keep up with the advancements these companies are making in technology.
For a while now, Alibaba has been using AI in its products and services. This includes tailoring product recommendations for users, analyzing data in industrial settings, and creating marketing content for its e-commerce sites like Tmall, Taobao, and 1688.
In October, Alibaba introduced a new version of its artificial intelligence model, directly competing with similar models developed by major U.S. tech companies like Microsoft and Amazon.
Known as Tongyi Qianwen 2.0, this is a large language model (LLM). An LLM is trained using extensive data and serves as the foundation for generative AI applications like OpenAI’s ChatGPT. According to Alibaba, Tongyi Qianwen 2.0 represents a significant improvement over its earlier version, which was introduced in April.
Alibaba faces challenges as it abandons plans to separate its cloud business, experiencing a significant loss in market value. The decision aligns with global tensions impacting major tech companies. Meanwhile, Alibaba intensifies its investment in artificial intelligence, unveiling Tongyi Qianwen 2.0, aiming to compete with leading U.S. counterparts in the evolving tech landscape. Additionally, the revelation of Jack Ma’s family trust disposing of Alibaba shares adds financial complexity to the company’s narrative.