The recent decision by Alibaba Group Holding Limited (OTC:BABAF) to cancel the spinoff of its cloud business was met with mixed responses from investors.

What Happened: As reported by CNBC, Morgan Stanley scratched Alibaba from its top pick in the internet sector, pointing to the unexpected cloud IPO cancellation as a contributing factor. The team of analysts, headed by Gary Yu, readjusted the price target from $125 to $110, still suggesting a 42% upside potential.

The "lackluster" earnings report of the company and the cloud spinoff cancellation were criticized by Bernstein analysts who scaled back the price target from $100 to $93.

On the other hand, Barclays proposed that the cancellation of the spinoff might be the "right decision" in the face of regulatory uncertainties. The bank commended the company's "aggressive" share buybacks and newly announced annual dividends, retaining a $138 price target.

JPMorgan analysts also weighed in, citing worries about Alibaba's cloud business failing to meet growth estimates. While they recognized the new dividend, they don't think it will be adequate to counteract investor disappointment over the scrapped cloud spinoff plan. JPMorgan has a $150 price target on the stock.

Why It Matters: This decision follows Alibaba's recent revelation that it would not list its cloud computing segment, which competes with Amazon.com Inc. and Microsoft Corporation, due to U.S. chip curbs. The U.S. has made it difficult for Chinese companies to get their chip supplies from U.S. companies, thus creating uncertainties for Alibaba's cloud arm.

This development has led to a sharp plunge in Alibaba's market value by $20 billion, marking the steepest single-day fall in its shares in over a year. This reversal by Alibaba resonates with the concerns raised by Chinese social media and gaming firm Tencent Holdings, which is also contemplating domestic alternatives due to U.S. export restrictions.