As reported by Reuters, the Biden administration launched the probe to find out more about how Alibaba Cloud stores the data of US clients including personal information and intellectual property and to see if the Chinese government could gain access to it. According to people familiar with the matter that spoke to the news outlet, the potential for China to disrupt access to information stored on the company's cloud computing service is also a concern.
Alibaba's US cloud business is still relatively small when compared to AWS and Microsoft Azure with annual revenue estimated to be less than $50m according to Gartner. In addition to cloud computing services, Alibaba also offers a CDN to help speed up access to users' websites by reducing latency and improving load balancing.
If the US government's probe into Alibaba finds anything serious, regulators could force the company to take measures to reduce the risks posed to its users' data or prohibit Americans from using the service altogether.
National security probe
Although the Commerce Department under President Trump was concerned about Alibaba's cloud business, it wasn't until President Biden took office that a formal review was launched.
The probe itself is being handled by a small office within the Commerce Department known as the Office of Intelligence and Security which was created under the Trump administration as it tried to prevent Chinese tech from finding its way into critical US infrastructure.
Over the years, Alibaba Cloud has formed business relationships with units of top firms in the US including Ford, IBM, Red Hat and HPE according to press releases issued by the company.
Before the trade war between the US and China began, Alibaba had high hopes for its cloud business in the US and back in 2015, the company launched a cloud computing hub in Silicon Valley with the aim of one day competing with Amazon, Microsoft and Google in the space.
We'll have to wait and see if the Commerce Department's national security probe finds anything but until then, businesses might want to hold off on signing up for web hosting or for CDN services with Alibaba Cloud.