Hong Kong shares in China’s most prominent tech firm tumbled after it scrapped plans to spin off its cloud business. The move is a setback for investors as it would have created a separate public listing for the fast-growing division, which could be valued at about $41-$60 billion. The Chinese e-commerce giant had announced the plan in March as part of a significant restructuring that broke it into six units. It also put on hold an IPO of its Freshippo groceries business. Analysts had warned that the division listing may attract scrutiny from Chinese and foreign regulators due to the reams of data it manages.

Alibaba (BABA) said it had canceled the whole spin-off of its cloud intelligence business as uncertainties fuelled by the U.S. restrictions on exports of semiconductors used in artificial intelligence applications to China weighed on its growth. “The company will continue to focus on and invest in its Cloud Intelligence business to drive future growth,” it said Thursday. The news sent BABA stock down as much as 10% in New York trading, overshadowing a quarterly earnings report that beat estimates.

China’s e-commerce leader needs help to revive sales amid a tepid consumer economy and fierce competition from rivals, including e-commerce platform Pinduoduo and short-video maker Douyin. It is also facing pressure from the U.S. to rethink its policy on technology-related exports.

Analysts say the decision to scrap the cloud-unit spin-off may help Alibaba focus on improving its core business despite the slowdown in the Chinese economy. It will also give it time to build its chip manufacturing plant, enabling it to make the cutting-edge 2-nanometer chips required to power its A.I. data centers.

Unlike other cloud providers such as Amazon Web Services and Microsoft, which rely on outside chipmakers, Alibaba is building its facilities to ensure it has enough capacity to meet the growing demand for its cloud services. It is also expanding its partnership with Japan’s semiconductor maker TSMC to produce newer, faster, and more powerful chips.

CFRA analyst Angelo Zino kept a hold rating on Alibaba but trimmed the research firm’s one-year price target for U.S-listed shares to 87 from 105. He said the U-turn on the cloud spin-off was a setback, but he expected the company to be able to return cash to shareholders through dividend payments.