😎 Goldman's feeling good

What’s going on here?

Alibaba called off its cloud division’s much-awaited spinoff, landing back on Earth with a bump.

What does this mean?

Alibaba pledged to split its business into six parts back in March, so each division could focus better, compete harder, and prosper more. That could’ve been just the tonic after the pandemic and the government’s tech crackdown – but a stiff drink may be needed now instead. Alibaba was forced to cancel the spinoff of the cloud division, which competes against Amazon Web Services and Microsoft Azure. It’s a biggie: the business serves most Chinese technology companies and half of China’s generative AI firms – including Alibaba’s own AI initiatives. Problem is, it needs super-smart chips – the type Nvidia makes – to run, and now that the US has banned exports of the tiny shiny tools to China, the division’s hanging in the balance. Add that to last quarter’s worse-than-expected results, and it’s no wonder that Alibaba’s stock initially slipped 10% after the release.

Why should I care?

For markets: China’s seeing stars (and stripes).

Nvidia’s been trying to bypass the chip ban – after all, a sale’s a sale. But for now, Chinese tech firms need to scour the black market or rely on outdated chips. That’s left even the country’s biggest companies falling behind their US rivals, with some calling the curb “an existential challenge” for China’s development. After all, the longer you lag, the harder it is to catch up – especially when this tech moves at the speed of light.

The bigger picture: The elephant in the room.

The presidents of the US and China are sharing words and local delicacies as we speak. So far, they’ve managed to agree on problems like drug crises and military communications, but the export ban hasn’t yet made the agenda. Although given that the US tightened the restrictions on advanced AI chips only a few weeks ago, the issue’s unlikely to be squashed anytime soon.

What’s going on here?

Activist fund ValueAct Capital has been building a major stake in Disney, according to news out on Wednesday.

What does this mean?

When activist investors buy a hefty chunk of a company, it’s because they plan to pressure the firm into changing its ways. So boy, Disney’s about to feel some force. Trian Fund Management bought a $2 billion-plus stake in the kingdom last year. And it turns out that while Disney’s stock was hanging around $80 this summer, ValueAct picked up an undisclosed stake that is suspected to be one of the fund’s biggest. The two outside influences could be just what the house of Mickey Mouse needs: streaming service Disney Plus has struggled to win over customers, leaving Disney’s stock stuck on pause. So despite former CEO Bob Iger recently returning to the hot seat, investors celebrated ValueAct’s involvement by giving Disney’s stock a lift.

Why should I care?

For markets: Let’s get straight to business.

Since reclaiming the throne, Iger’s dropped hints about selling channels like ABC and finding a strategic partner for ESPN – a major sports league, for example. Plus, he recently bumped up Disney’s annual cost-cutting goal from $5.5 billion to $7.5 billion. But ValueAct has a track record of reworking companies including Salesforce, Microsoft, Spotify, and the New York Times. So even if Iger’s plans start panning out, ValueAct’s expertise may be more than welcome in the boardroom.

The bigger picture: The ultimate Disney adult.

ValueAct believes Disney’s theme parks and consumer products alone are worth the price it paid, since the duo brings in around $10 billion a year. But the activist reckons that if you iron out the creases in the media segment and make the company a little more slick, Disney’s shares could be worth up to $190 each. If ValueAct can realize that potential, the stock will have more than doubled since the activist arrived.