US Gov't Probes Alibaba's Cloud Unit For National Security Risks

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by Tyler Durden
Tuesday, Jan 18, 2022 - 11:10 PM

Reuters reports the U.S. Commerce Department's Office of Intelligence and Security is reviewing e-commerce giant Alibaba Group's cloud business to decide whether U.S. citizens' and businesses' most sensitive personal information stored on a foreign adversary's cloud network is a national security risk. 

Three people briefed on the matter told Reuters the Office of Intelligence and Security launched a probe on how U.S. citizens and companies store personal information and intellectual property abroad and whether the Chinese government could access the cloud to steal the sensitive information. 

Findings from the probe could eventually influence how personal information and intellectual property are stored abroad. According to one of the sources, there's the very real possibility that Americans could be prohibited from using the service. 

Alibaba's U.S. cloud business is tiny and wouldn't significantly impact U.S. citizens and companies if there was a ban. The company's U.S. cloud business only generates $50 million in revenue per year. 

Concern about Alibaba stemmed from former President Trump. The Office of Intelligence and Security was created under the Trump administration to investigate U.S. firms and the internet, telecom, and tech companies from doing business with foreign adversaries like China and Russia. The office has been concentrated on Chinese cloud providers, said one of the sources, because Beijing's data theft is a real threat. 

Months before President Trump left office. He issued a warning against Chinese cloud providers "to prevent U.S. citizens' most sensitive personal information and our businesses' most valuable intellectual property...from being stored and processed on cloud-based systems accessible to our foreign adversaries."

Alibaba's US ADR shares slid Tuesday morning on a combination of the Reuters' report and a jump in Treasury yields.

Tech tensions between the U.S. and China have been ongoing as both superpowers are on a course for a 'soft' technological decoupling. 

In recent years, Washington has raised many concerns about China's technological advancements and has deemed it a national security risk.