Alibaba shares fell amid concerns over restrictions on Nvidia chip shipments

Shares of Alibaba and other Chinese AI companies fell during trading in Hong Kong. Investors are concerned that the U.S. will tighten controls on semiconductor shipments to Chinese cloud providers due to the scandal surrounding Nvidia’s CEO, according to Bloomberg.

Alibaba shares fell nearly 7% in Hong Kong trading, leading the decline in the Hang Seng Tech Index. Shares of AI model developers Z.AI and MiniMax Group dropped 9% and 8%, respectively.

Uncertainty for Chinese cloud service providers has intensified ahead of earnings season, as investors take profits, Bloomberg notes. Next week, Alibaba and Tencent Holdings will report their results for the previous quarter.

Access to cutting-edge chips remains critically important for Chinese AI model developers, who are competing with U.S. companies for market share in the coding and agent-based solutions segments, according to Bloomberg.

Alibaba leases Nvidia chips through the Singapore-based cloud computing company Megaspeed International, whose former top executive—Alice Huang—is suspected of working for Chinese intelligence. Nvidia CEO Jensen Huang has admitted to having an extramarital affair with her. In addition, on the night of November 12, reports emerged about Huang’s relationship with Nvidia’s vice president of healthcare. Nvidia’s board of directors is preparing to remove him following reports of the two extramarital affairs, sources told the WSJ.

Against this backdrop, Nvidia may face tighter sanctions on exports from the U.S. to China, analysts have warned. According to Veda Partners, following the scandal, the likelihood of the Chip Security Act—aimed at preventing the smuggling of advanced AI chips—being passed has risen from 60% to 80%. The likelihood of the AI Overwatch Act—which tightens export controls on such chips—being passed has increased from 40% to 65%, while that of the Match Act—which restricts the supply of equipment for chip manufacturing—has risen from 35% to 60%. These initiatives could be approved as early as December as part of the annual defense budget.

“Now that regulations are tightening, the question is how long this crackdown will last—it will be a serious test for Chinese cloud service providers. They have been stockpiling chips since the beginning of the year, so they have some breathing room, but development timelines will inevitably be pushed back,” said Julia Pan, an analyst at UOB Kay Hian.

This article was AI-translated and verified by a human editor