It turns out that the reports of Jack Ma’s disappearance were somewhat exaggerated. Claims that the Alibaba (NYSE:BABA) co-founder had vanished sent BABA stock down on Jan. 4. However, shares rose back up sharply the day after when CNBC reported he was just “lying low.”
That said, shares fell again on Jan. 6 after President Donald Trump ordered a ban on Alipay — the company’s payment app — along with Tencent’s (OTCMKTS:TCEHY) WeChat Pay and other Chinese apps. The ban takes effect in 45 days, however, giving President-elect Joe Biden time to alter or abolish it.
But, the real irony of the situation is that Ma isn’t on the Alibaba board anymore. So, selling BABA stock because “Ma is missing” would be like selling Microsoft (NASDAQ:MSFT) because Bill Gates couldn’t find his way out of a library.
Instead, what’s more important here is the crackdown on BABA.
BABA Stock, China and Clouds
The actions by both Trump and the Chinese government — which has been cracking down on its “Cloud Emperors” in recent months — underscore just how worried nation states are by the rising power of cloud owners.
Alibaba, Tencent and Baidu (NASDAQ:BIDU), all which began as China’s version of Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google, are worth a combined $1.4 trillion. Currently, BABA stock itself makes up a large portion of that, too, with a market capitalization of almost $591 billion. However, each company also has a network of affiliates that dominate many sectors of the country’s offline economy, from movies to retail.
For instance, Alibaba owns the South China Morning Post, Hong Kong’s biggest newspaper. The company also controls Lazada Group, Singapore’s e-commerce platform, as well as a stake in Lyft (NASDAQ:LYFT). Ma himself is also a prolific investor, with interests in healthcare, insurance, consumer goods and finance.
Where Ma seemed to have overstepped the mark with the government, though, is with Ant Group. Alibaba owns one-third of the firm.
In October, Ma accused financial regulators of having a “pawnshop mentality.” At the time, Alipay was avidly pushing loans to individuals and small businesses, but only taking a small part of the loan risk.
This was beginning to look like what crashed the United States’ economy in the 2000s. But today, Ant is restructuring, with a regulated holding company controlling its banking activity. The firm will now also have to take on 30% of its loan risk.
Just Like America’s Crackdown
With China’s crackdown now in mind, it’s important to note what’s going on in the industry on this side of the globe. In fact, American “Cloud Czars” have much bigger market capitalizations than China’s Cloud Emperors and U.S. policymakers are just as suspicious of them.
For instance, antitrust suits have been launched against both Google and Facebook (NASDAQ:FB). More specifically, Facebook’s bid to build an alternate currency called Libra was rejected. Now its follow-on, called Diem, is also under attack from regulators.
What’s more, the European Union has filed antitrust charges against Amazon (NASDAQ:AMZN). Similarly, Apple (NASDAQ:AAPL) has fallen under scrutiny for the exclusivity policies of its App Store. Finally, you might remember that Microsoft was in antitrust hot water for over a decade.
But what does that have to do with BABA stock?
My point is that what China is doing to Alibaba and BABA stock isn’t very different from what American policymakers are doing to cloud owners here at home. They’re taking a dim view of domestic economic concentration, trying to make certain it’s constrained by law.
However, three things make Alibaba’s case different. And China’s brand of “communism” seems to be the least important to investors.
Instead, what’s important is that BABA’s network of investments gives it enormous external power within the broader economy. That’s something that American companies haven’t tried to build since the Microsoft case. So, Chinese regulators have a huge task on their hands.
Second, China’s efforts will push the Cloud Emperors to invest more internationally. This would be in line with other Asian industrial policies, which lead to national “champion” companies taking on the world. That’s what Taiwan Semiconductor (NYSE:TSM) does from Taiwan, for instance.
If that’s the case, then — and that’s my belief — we’re likely to get an international “war in the clouds” between American and Chinese cloud companies. And that will only make both sides stronger.
On the date of publication, Dana Blankenthorn held positions in AAPL, MSFT, AMZN, TSM and BABA.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.