• The U.S. Department of Defense has recommended adding Alibaba Group to its list of companies with alleged ties to China's military.
  • The White House has accused the tech giant of providing technical support and sensitive customer data, including AI services and payment records, to the People's Liberation Army.
  • Alibaba has vehemently denied the allegations, calling them 'complete nonsense' and politically motivated, as its shares face potential pressure from the escalating scrutiny.

In a significant escalation of U.S. scrutiny of Chinese technology firms, the Pentagon has recommended that e-commerce and cloud computing behemoth Alibaba Group be added to the Department of Defense's list of companies operating with the Chinese military. The move, confirmed by people familiar with the matter, follows accusations from the White House that Alibaba has provided technical support and sensitive customer data to the People's Liberation Army (PLA).

The specific allegations, detailed in a recent Pentagon report, claim that Alibaba's services—including its artificial intelligence capabilities and cloud infrastructure—have been leveraged by the PLA. The company is also accused of sharing user data such as IP addresses and payment records, raising acute national security concerns within the Biden administration.

Alibaba responded to the allegations with a strongly worded rebuttal. "These claims are complete nonsense and not grounded in fact," a company spokesperson said in a statement. The company maintains that it is a purely commercial entity and that the allegations are politically motivated. Attempts to reach the U.S. Department of Defense for further comment were not immediately successful.

This development signals a deepening of the U.S. campaign to limit the flow of advanced American technology and capital to Chinese firms perceived as supporting Beijing's military modernization. If formally listed, Alibaba would join other Chinese tech giants like Huawei and Hikvision on the so-called 'China Military Companies' list, a designation that can trigger restrictions on U.S. investment and access to American technology.

The timing presents a fresh challenge for Alibaba, which recently reported an 8% year-on-year revenue growth for its third quarter, driven in part by a 12% expansion in its cloud division. While the company has undertaken a major corporate restructuring to improve agility, its global ambitions, particularly in sensitive areas like AI and cloud computing, now face a formidable new regulatory hurdle. The company's efforts to assure international partners of its data governance and compliance standards have taken on a new urgency.

Correction: An earlier version of this article misstated the growth rate of Alibaba's cloud division. It was 12% in the most recent quarter.