What's Going On With Alibaba Stock Tuesday?

Alibaba Group Holding Limited's BABA stock is trading lower Tuesday in line with the broader indexes IShares China Large-Cap ETF FXI and KraneShares Trust KraneShares CSI China Internet ETF KWEB amid reports of China's services activity growing at the slowest pace in eight months in August.

The Caixin/S&P Global services purchasing managers' index (PMI) dropped to 51.8 in August from 54.1 in July, the lowest reading since December due to the pandemic.

The company's cloud division explored private fundraising from Chinese state-owned enterprises before its public listing in Hong Kong.

Alibaba, also known as the tech barometer of China, is working on a potential Cloud Intelligence Unit fundraising worth 10 billion yuan - 20 billion yuan ($1.4 billion - $2.8 billion), Bloomberg cites familiar sources. 

Prospective investors include state-backed telecommunication companies.

Alibaba eyed spinning off the unit by distributing a stock dividend to shareholders within 12 months. 

According to Bloomberg Intelligence analysts, the fundraising from state-owned firms could boost its chances of bagging new government cloud contracts. 

A listing may value the cloud unit over $55 billion with the potential deal.

In 2023, Alibaba shared organizational restructuring plans to split into six mostly independent pieces. 

However, Cloud Intelligence Group listing would not involve raising new money by selling shares to the public.

In July, Alibaba Cloud launched a large language model, Tongyi Wanxiang, that can create a variety of visuals ranging from animation and sketches to 3D cartoons.

Meanwhile, China aims to launch a new state-backed investment fund to raise 300 billion yuan ($41 billion) for its semiconductor sector.

One main area of investment will be equipment for chip manufacturing, in line with President Xi Jinping's vision for China to achieve self-sufficiency in semiconductors.

China's move assumes vital importance amid U.S. tech sanctions on China, which fueled a cold war as the artificial intelligence frenzy gained momentum.

In August, Alibaba reported first-quarter FY23 revenue growth of 14% year-on-year to $32.29 billion, beating the consensus of $31.20 billion. Adjusted earnings per ADS of $2.40 beat the consensus of $2.02. Cloud Intelligence Group grew by 4% Y/Y to $3.47 billion.

Price Action: BABA shares traded lower by 0.99% at $94.07 premarket on the last check Tuesday.