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Alibaba has lost $26 billion in market cap since Thursday, after it shelved plans to spin off its cloud business.
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Executives said they needed to “reset” strategy, and pointed to US restrictions on chip sales to China.
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The stock dropped more than 9% on Thursday, continuing its slide on Friday.
Alibaba walked back plans to spin off its $11 billion cloud business this week, sending shares of the Chinese tech giant lower for a second day on Friday.
By market value, Alibaba has shed about $26 billion in two days, with most of that loss coming on Thursday when the stock plunged 9.1% in US trading.
It marks the steepest stock sell-off for the stock in more than a year.
Chairman Joseph Tsai and chief executive Eddie Wu, said the company needed a strategy “reset,” Bloomberg reported. Wu pointed to the US’s clampdown on chip sales to China as a driver of the decision.
“Circumstances have changed,” Tsai said on an earnings call. Alibaba must prioritize building up cash, “because in the AI-driven world, to develop a full-blown business based on a very networked and highly scaled infrastructure, it requires investment.”
In addition, Alibaba will suspend its listing for its grocery arm, Freshippo, which was already on shaky ground amid a weakening consumer sector in China.
The Biden Administration has introduced restrictions on certain chip exports for artificial intelligence and high-level computing. Policymakers have attempted to curb China’s access to certain technologies that could be used for military applications, though it’s had sizable ripple effects across the business landscape and weighed on Alibaba as well as China-based competitors Tencent Holdings and JD.
In October, the US barred sales of certain advanced chips from Nvidia.
The spin-off for its Cloud Intelligence Group had been planned as part of a widespread overhaul of the Alibaba empire. Analysts told Bloomberg that this week’s decision was expected to be “one of the marquee corporate actions,” and increase autonomy for that part of the business.
Now, however, executives plan to grow the cloud arm organically, and to calm shareholders, they announced issue the first-ever annual dividend of $2.5 billion.
“We believe that a full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,” the company said.
Jack Ma, the founder and former chairman of the company, said he remains “very positive” about the firm despite the sell-off,
Alibaba reported solid quarterly earnings, posting an 8.5% increase in sales to about $31 billion, just above consensus expectations. The stock is down more than 16% year-to-date.
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