Alibaba shares retreat on fears of tighter curbs on Nvidia chip shipments
Alibaba stock is dropping as the Nvidia scandal deepens / Photo: Robert Way / Shutterstock
Shares of Alibaba and other Chinese AI companies fell in Hong Kong trading. Investors worry that the scandal surrounding Nvidia’s CEO could prompt the U.S. to tighten controls on chip shipments to Chinese cloud providers, Bloomberg reports.
Details
Alibaba shares fell around 7% in Hong Kong, leading declines in the Hang Seng Tech Index. AI model developers Z.AI and MiniMax Group slid 9% and 8%, respectively.
The uncertainty for Chinese cloud providers comes as investors take profit ahead of earnings season, Bloomberg notes. Alibaba and Tencent Holdings are due to report results for their latest quarters next week.
Context
Access to advanced chips remains critical for Chinese AI model developers as they compete with U.S. companies for market share in coding and agentic workflows, Bloomberg notes.
Alibaba rents Nvidia chips through Singapore-based cloud provider Megaspeed International, whose former executive Alice Huang is suspected of working for Chinese intelligence. Nvidia CEO Jensen Huang acknowledged having an extramarital affair with her. A report late Wednesday disclosed that Huang had also had a relationship with Nvidia’s vice president of health care. Nvidia’s board is preparing to remove him, sources have told the Wall Street Journal.
Analysts warned that Nvidia could face tighter restrictions on exports from the U.S. to China. Veda Partners estimates that the scandal raised the odds of passage for the Chip Security Act, which aims to curb smuggling of advanced AI chips, from 60% to 80%. The odds rose from 40% to 65% for the AI Overwatch Act, which would tighten export controls on those chips, and from 35% to 60% for the Match Act, which would restrict shipments of chipmaking equipment. The measures could pass as early as December as part of the annual defense bill.
“Now that scrutiny is ramping up, how long that tighter enforcement lasts will pose a real challenge for Chinese cloud service providers,” said Julia Pan, an analyst for UOB Kay Hian. “They’ve been stockpiling chips since the start of the year, so they have some buffer, but R&D timelines will inevitably be postponed.”
