The e-commerce giant had previously scrapped plans to spin off its cloud business over US chip export restrictions

Chinese tech stocks in Hong Kong plummeted on Friday shortly after a massive decline in Alibaba Group shares that followed the online retailer's announcement to scrap plans to spin off its cloud business.

Alibaba Group's Hong Kong shares dropped 10% a day after the e-commerce giant said it would shelve cloud spinoff due to major uncertainties over US restrictions on exports of chips used in artificial intelligence  (AI) applications.

The Hang Seng Index, which represents the 30 largest technology companies listed in Hong Kong, shed 2.12%, or 378.63 points, to close at 17,454.19.  Meanwhile, the Hang Seng China Enterprises Index lost 2.33%.

Alibaba's shares are down close to 15% year-to-date, underperforming the broader Hang Seng index's 11.2% decline in the same period.

Alibaba Goup, once the most valuable in the Asian stock markets, was worth around $830 billion at its peak in October 2020. However, after the major online retailer took center-stage in Beijing's technology sector crackdown its value dropped to less than one fourth of that amount. The devaluation had been also exacerbated by a slowdown of Chinese economic growth.

The company's latest announcement, which underscores a reversal of its ambitious plans to carve out the cloud business as part of the biggest restructuring in Alibaba's 24-year history, comes amid increasing concerns over US export restrictions.

Earlier this week, similar worries were raised by Chinese tech giant Tencent that said that the curbs would force it to seek domestically produced alternatives.

Washington introduced curbs on its most advanced computing chips used for artificial intelligence and chip-making equipment in 2022 with the aim of stalling China's ability to manufacture and develop advanced semiconductors that boost its military capabilities. The list of restrictions has since been expanded, and a number of Chinese tech firms were blacklisted.

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