Shares of Alibaba Group Holding Ltd. fell by 4.8% on May 19, 2025 in Hong Kong. This notable decline was reflected in the Hang Seng China Enterprises Index.

The drop follows after a report by The New York Times, which revealed that the Trump administration and congressional officials have raised concerns regarding Apple Inc.’s potential deal with Alibaba.

The deal reportedly involves making Alibaba’s AI technology available on iPhones in China. Notably, neither Apple, Alibaba, nor the White House have commented on the situation.

This situation adds pressure on Alibaba, whose shares have been underperforming following a recent quarterly revenue report that fell below market expectations.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Tech companies caught in the crossfire of deteriorating US-China relations

The scrutiny of Apple’s potential deal with Alibaba reflects the broader deterioration in US-China relations, which experts characterize as being at their worst since diplomatic relations were established in 1979 1.

This Apple-Alibaba situation isn’t happening in isolation but against a backdrop where both the Trump and Biden administrations have consistently labeled China a “strategic competitor,” particularly in technology sectors 2.

The challenge for multinational tech companies is navigating a relationship where the world’s two largest economies represent 44.2% of global nominal GDP yet increasingly view their interactions through a lens of rivalry rather than cooperation 2.

Companies like Apple must balance their commercial interests in China’s massive market with the growing political risks, as US regulators increasingly scrutinize deals that might provide Chinese companies access to sensitive technologies or data.

2️⃣ Heightened scrutiny of Chinese tech deals reflects broader national security shift

The White House’s concerns about the Apple-Alibaba AI deal align with a systematic expansion of regulatory oversight for foreign investments in technology sectors, particularly those from China 3.

Federal authorities have dramatically expanded the Committee on Foreign Investment in the United States (CFIUS) jurisdiction to review a broader range of transactions, including previously unscrutinized non-controlling investments in critical technology sectors 4.

These measures specifically target preventing foreign adversaries from gaining access to critical technologies and infrastructure that could have dual civilian-military applications 3.

The regulatory landscape has become so complex that companies must now conduct extensive due diligence and risk assessments before pursuing cross-border tech partnerships, especially those involving AI and data management 5.