On Friday, Chinese tech stocks plunged following a sudden drop in the shares of Alibaba after its announcement that it would be scrapping its planned to spin-off of its cloud business.

Following Alibaba’s announcement that due to uncertainties surrounding the new restrictions by the US on the export of semiconductor chips used in artificial intelligence (AI) applications, it would be tabling its planned spinoff of its cloud business, the online retailer’s Hong Kong shares fell 10%.

Simultaneously the Hang Seng Index, representing the 30 biggest tech companies listed in Hong Kong lost 378.63 points, for a 2.12% loss, closing at 17,454.19. At the same time, the Hang Seng China Enterprises index lost 2.33%.

So far this year, Alibaba has seen its shares decline almost 15% year to date, as the broader Hang Seng index has declined 11.2% over the same period.

Once the most valuable company in the Asian stock markets, Alibaba Group peaked in net worth at about $830 billion in October 2020. However following the e-commerce giant becoming the focus of the Chinese government’s crackdowns on the technology sector, it lost more than three-quarters of its total value. The decline in its value was only made worse by the decline in economic growth in China.

The company had planned to carve out the cloud business, as part of the largest restructuring the company had seen in its 24 years in business, however increasing worries over the effects of US export restrictions have now forced a reversal of those plans.

Alibaba is not alone in confronting a changing business terrain as tensions grow between China and the US. Chinese tech giant Tencent expressed similar concerns earlier this week, noting that the restrictions would force it to seek out domestically produced alternatives.

The export restrictions were first implemented by the United States in 2022, and were designed to deny China access to the US’s most advanced computing chips with artificial intelligence applications in an effort to constrain China’s technical advancement in fields which could have military or national security applications. Since then Washington has expanded the list of restrictions, and added a number of Chinese companies to a blacklist of firms which cannot receive US technology.