Alibaba Group has decided to halt its plans for the spin-off of its cloud division, primarily due to the uncertainties arising from U.S. export regulations on artificial intelligence (AI) chips.
In March, the Chinese e-commerce powerhouse had announced its intent to restructure into six distinct business entities. However, the Cloud Intelligence Unit, which predominantly focuses on AI and cloud research, will remain integrated within the parent company rather than becoming an independent entity.
The company indicated that the anticipated restructuring would not enhance shareholder value as initially expected. In its earnings report, Alibaba noted, “The recent expansion of U.S. restrictions on the export of advanced computing chips has created uncertainties for the prospects of the Cloud Intelligence Group.”
The cloud division had been projected to be valued between $41 billion and $60 billion if it had been spun off, yet such a move would likely have faced significant regulatory scrutiny in both the U.S. and China. While the cloud unit will continue to function, it will not operate as a separate company.
Adding to the transition, CEO Daniel Zhang, who had previously identified the cloud division as a strategic priority, is set to depart from the company in September.