After a more than $1 trillion rout, Beijing appears to be warming to Chinese tech giants
Beijing’s regulatory crackdown on the Chinese tech sector began in late 2020, wiping off more than a combined $1 trillion from the country’s biggest companies.
There are now signs that the central government is softening its stance towards internet titans like Alibaba, in a move that could prove positive for Chinese tech stocks.
“The regulatory headwinds that we had in the past two years … that’s now becoming from a headwind to a tailwind,” George Efstathopoulos, portfolio manager at Fidelity International, told CNBC’s “Street Signs Asia” on Wednesday.
On Tuesday, Alibaba announced a major reorganization, looking to split its company into six business units, in an initiative “designed to unlock shareholder value and foster market competitiveness.”
Over the past two years, China’s government has often railed against the “disorderly expansion of capital” of tech firms that have grown into large conglomerates. Part of Alibaba’s announcement noted that these splintered businesses could raise outside capital and even go public, seemingly heading in a contrary direction to Beijing’s concerns.
Efstathopoulos said that the move could indicate a green light from the upper echelons of the Chinese government.
“You have senior leadership blessing for unlocking value, and, to me, that is a fantastic indication where we are now essentially moving from regulation not being the issue that it was,” Efstathopoulos said.
Jack Ma’s return
Alibaba’s restructure isn’t the only sign that Beijing could be easing up its scrutiny of the tech sector. Jack Ma, the founder of Alibaba, returned to public view in China for the first time in months.
Some credit Ma with sparking the start of the tech crackdown in October 2020, when the billionaire made comments that appeared critical of China’s financial regulator. A few days later, Ant Group, the financial technology affiliate of Alibaba that was controlled by Ma, was forced to scrap its massive Hong Kong and Shanghai dual listing, after regulators said it did not meet the requirements to go public.
Following this, the Chinese government doled out huge antitrust fines to Alibaba and food delivery giant Meituan, introducing a slew of regulation in areas from data protection to the way in which companies can use algorithms.
Ma’s reappearance in Hangzhou, where Alibaba is headquartered, has been read as another sign of Beijing’s more positive view toward the tech sector and entrepreneurs.
“Jack just didn’t show up in Hangzhou because he was tired of traveling around. I think it was well orchestrated and fits with the government’s campaign to demonstrate that, you know, they are relaxing pressures on their private sectors and are welcoming the rest of the world,” Stephen Roach, a senior fellow at Yale University, told CNBC’s “Squawk Box Asia” on Tuesday.
Economic growth in focus
There have been further signs of regulatory easing over the past few weeks.
The gaming sector was hard hit in 2021, as authorities grew concerned about addiction among young people in China. Chinese regulators froze the approval of new game releases for several months. Last April, authorities began to green light new games, mainly from domestic firms. This month, the video game licensing regulator gave its stamp of approval to a batch of foreign titles for release in China.
Meanwhile, Chinese ride-hailing giant Didi — one of the companies caught up in the regulatory overhaul — announced plans to expand its business. Didi went public in the U.S. in June 2021, but found itself subjected to a cybersecurity review by Chinese regulators within days of listing. It eventually delisted from the New York Stock Exchange and plans to float in Hong Kong.
Over the last few days, foreign technology executives including Apple CEO Tim Cook and Qualcomm CEO Cristiano Amon visited China and met with government officials.
Jack Ma, founder of Alibaba, reappeared in the public view in China for the first time in months. Alibaba then announced a huge reorganization of its business. Experts see the move as a signal that the Chinese government is softening its stance toward tech giants after a crackdown that began in late 2020.
Jean Chung | Bloomberg | Getty Images
In addition to warming to the domestic tech sector, China is also courting foreign business. Its economy has been battered over the past two years, thanks in part to the country’s strict Covid policies and regulatory tightening. The government now aims for around 5% economic growth this year.
To achieve that, it will need the help of private businesses — including the tech sector.
“China is facing both weak economic growth and rising tech competition from the U.S. It’s a pretty tough position to be in. So they need the economy to fire on all cylinders. Tough regulations on big tech platforms just doesn’t make sense at this juncture,” Linghao Bao, tech analyst at Trivium China, told CNBC via email.
Is China tech out of the woods yet?
While there are promising signs for investors, there is also reason to be cautious, warned Xin Sun, senior lecturer in Chinese and east Asian business at King’s College London.
Sun describes the Alibaba reorganization as a move to “break up Alibaba’s business empire and to reduce its huge influence that could potentially pose a threat” to the Chinese Communist Party’s rule.
“After restructuring, the organizational structure of Alibaba will become more decentralized, and the control over its assets, data and resources will be less concentrated. The Party could then impose stronger political control over each of the new entity more easily,” Sun added.
He cautions against too much optimism around the Chinese technology sector. While the latest moves bring some regulatory certainty, many questions remain about how other tech giants might fare.
“In the short run, Alibaba’s restructuring might be perceived as the routinization of the government regulatory actions and provide some regulatory certainty for the sector,” Sun said.
“In the long run, however, it raises more questions about the fate of other tech giants. Will Tencent, Meituan, and ByteDance be broken up too? If so, do they make their own decisions or do they just wait for the order from the government? Such uncertainty will keep weighing on entrepreneurs and investors, undermining their confidence.”
Workday CEO Carl Eschenbach, right, walks to the morning session during the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 11, 2025.
David Paul Morris | Bloomberg | Getty Images
Workday shares slid more than 5% in extended trading Tuesday after the finance and human resources software maker issued quarterly margin guidance that came in below Wall Street projections.
Here’s how the company did in comparison with LSEG consensus:
- Earnings per share: $2.32 adjusted vs. $2.18 expected
- Revenue: $2.43 billion vs. $2.42 billion expected
The company forecast a fourth-quarter adjusted operating margin of at least 28.5% and $2.355 billion in subscription revenue, according to a statement. The StreetAccount consensus was a 28.7% margin and $2.35 billion in subscription revenue.
Workday’s revenue grew about 13% year over year in the quarter, which ended on Oct. 31. Net income of $252 million, or 94 cents per share, was up from $193 million, or 72 cents per share, in the same quarter a year ago.
Subscription revenue in the third quarter totaled $2.24 billion, with an adjusted operating margin of 28.5%. Analysts polled by StreetAccount had anticipated $2.24 billion in subscription revenue and a 28.1% margin.
During the fiscal third quarter, Workday announced artificial intelligence agents for analyzing employee performance testing financial health, and the company revealed plans to buy AI and learning software startup Sana for $1.1 billion. Also, activist investor Elliott Management said it had built a Workday stake worth over $2 billion.
Workday has seen its stock decline this year as pundits discuss the risk of generative AI tools threatening the growth prospects for cloud software incumbents. Company shares have fallen 9% so far in 2025, while the Nasdaq Composite index has gained 19%.
WATCH: Workday CEO Carl Eschenbach: There’s a narrative that AI is eating into software, that is false
Technology
A third high-profile tech leader is leaving GM as part of a software-product restructuring
Enrique Lores, President and Chief Executive Officer of HP Inc. speaks at COMPUTEX forum in Taipei, Taiwan June 3, 2024.
Ann Wang | Reuters
PC and printer maker HP Inc. said Tuesday it’ll lower its headcount by 4,000 to 6,000 people, representing a cut of up to 10%. HP also issued a lower-than-expected earnings projection for the new fiscal year.
Shares of the company fell 6% in extended trading.
Here’s how HP did versus LSEG consensus estimates:
- EPS: 93 cents adjusted vs. 92 cents expected
- Revenue: $14.64 billion vs. $14.48 billion expected
HP’s revenue increased 4% year over year in the quarter, which ended on Oct. 31, according to a statement. Net income of $795 million, or 84 cents per share, was up from $763 million, or 80 cents per share, in the same quarter a year ago.
For the first quarter of HP’s fiscal 2026, the company called for 73 cents to 81 cents in adjusted net earnings per share, while the LSEG consensus was 79 cents. For all of fiscal 2026, HP sees $2.90 to $3.20 in adjusted per share, below the LSEG consensus of $3.33.
“HP’s outlook reflects the added cost driven by the current U.S. trade-related regulations in place, and associated mitigations,” the company said in the statement.
The company’s personal systems unit that includes desktop and laptop computers contributed $10.35 billion in revenue, up 8% and above StreetAccount’s $10.15 billion consensus.
HP said it expects to complete the headcount reduction by the end of fiscal 2028. The company said the restructuring will result in savings of at least $1 billion in annualized gross run rate by the end of fiscal 2028. HP said it expects to incur about $650 million in charges, of which $250 million will happen in fiscal 2026.
“As we look ahead, we see a significant opportunity to embed AI into HP to accelerate product innovation, improve customer satisfaction and boost productivity,” HP CEO Enrique Lores said on a conference call with analysts.
Corporate executives across industries are hoping to draw on generative artificial intelligence products to speed up software developers and automate customer service. Cloud providers are buying large supplies of memory to meet computing demand from companies that build AI models, such as Anthropic and OpenAI, leading to a rise in the cost per gigabyte of RAM this year.
HP, whose headcount stood at 58,000 as of December, announced a similarly sized round of layoffs in 2022. Several other technology companies have announced layoffs in recent months as U.S. consumers face higher prices and interest rates.
“Memory costs are currently 15 to 18% of the cost of a typical PC, and while an increase was expected, its rate has accelerated in the last few weeks,” Lores said.
The company does expect to benefit after Microsoft stopped supporting its Windows 10 operating system in October, which will lead people to buy new machines, Lores said. Around 60% of HP’s installed base has moved to Windows 11, he said.
HP’s printing business did $4.3 billion in revenue, down 4%. The pricing environment is competitive, and customers are putting off purchases of new models, said Karen Parkhill, the company’s finance chief.
As of Tuesday’s close, HP shares were down 25% for the year, while the S&P 500 index has gained 15% in the same period.
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