Shares of Alibaba Group Holding Ltd. slumped after a report that the Trump administration has raised concerns over Apple Inc.’s potential deal with the Chinese technology firm.

Alibaba’s stock dropped as much as 4.13% on Monday in Hong Kong, leading declines on the Hang Seng China Enterprises Index. The broader gauge was down 1.4% before paring its drop.

In recent months, the White House and congressional officials have been scrutinizing Apple’s plan to strike a deal with Alibaba to make the Chinese company’s AI available on iPhones in China, the New York Times reported, citing three people familiar with the deliberations. Apple, the White House and Alibaba did not provide comments for the report.

The news deals another blow to Alibaba, whose shares have been falling in the past few sessions as its quarterly revenue missed estimates. The results disappointed investors who had embraced the Chinese e-commerce leader as one of the front-runners in the DeepSeek-inspired AI boom.

“Alibaba’s potential cloud-revenue upside faces risks from US resistance toward Apple’s potential deal to make the Chinese company’s AI available on iPhones in China,” Bloomberg Intelligence analyst Catherine Lim wrote in a note. “Until more clarity emerges, Alibaba might delay research outlays and capital spending on related infrastructure.”

In February, Alibaba’s Chairman Joseph Tsai said Apple’s iPhones will use his company’s AI technology, adding fuel to the stock’s searing rally back then. Even with the latest retreat, shares are up more than 40% this year thanks to the earlier gains.

If the partnership were to be delayed — or fall apart — a bigger damage may be incurred to the iPhone maker, according to some market watchers, as China is its most important market after the US. Apple’s sales from China fell 2.3% in the quarter ended March 29, as it struggled to fend off local rivals including Xiaomi Corp. and Huawei Technologies Co.

“Apple has much more to lose than Alibaba if it walks away from the AI deal,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Ultimately Apple will need an AI partner in China or its phones will lose competitiveness.”