Alibaba Group Holding Ltd (NYSE: BABA) Warns Decelerating Consumers Spending Will Hurt Earnings and Launches a Server Chip

Alibaba Group Holding Ltd (NYSE: BABA) is expected to release its earnings report on November 5  ahead of China’s largest online shopping festival called “Singles Day.” Analysts have slashed their consensus earnings estimates for the year by around 5% over the last weeks amid waning domestic consumer spending momentum.

Alibaba facing challenges as analysts slash earnings 

According to Daiwa Capital Markets Hong Kong Ltd, the eCommerce company has been facing challenging quarters, evidenced by the recent cut on estimates. The company’s Hong Kong-listed stock rebounded 24%  the other week bit concerns regarding the Chinese Communist Party’s regulation on tech firms and slowing economic recovery have seen the stock lose steam.

With the pandemic plaguing East Asia nations where most consumables are manufactured, retailers have been stymied of receiving goods.  Supply chain disruptions are impacting the delivery of goods due to a lack of space at warehouses and rail yards. Port drivers’ dearth has worsened the problem.

Ahead of the holiday shopping season, retailers such as Walmart and Target expect everything to be usual, but that remains to be seen.  The reality is that deliveries will be late and most ho9liday products will be bought early this year. However, retailers can take a leaf from Alibaba, which celebrates singles day in early November.

Alibaba launches its server chip

The Chinese e-commerce giant is foraying into the cloud computing sector after it launched its new server chip called Yitian 710 that will be used in a new service called Panjiu. The chip is based on advanced 5-nanometer tech, marking a significant milestone in pursuing chip self-sufficiency. The chip is based on Micro-architecture offered by SoftBank Group Corp’s Arm Ltd.

Alibaba will not sell the chip directly to clients, but rather, its cloud computing clients will purchase services based on the technology. In addition, the eCommerce giant will design the chips and will not be the one manufacturing them.

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Published by Duncan Oleinic

Duncan Oleinic is from New Yourk. After graduating with a degree in physics, he began his career as an analyst in a broking firm. Through this experience he was able to advance to the role of correspondent for a U.S based financial news provider, where he worked from 2001 to 2007. He subsequently joined a merchant banking firm as a financial analyst focused on valuing unlisted companies in the sub-continent. Over the course of his two years here, he performed valuations of several media companies which were later acquired by peers.

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