The shocking decision by Alibaba Group Holding Ltd. to cancel the spinoff of its cloud division is offering a fresh reason for investors to sell China tech stocks in an earnings season yielding mixed results.

Alibaba plunged 10% Friday in Hong Kong after withdrawing plans to spin off and list its $11 billion cloud business due to US restrictions on advanced semiconductor sales to China. The announcement followed a similar warning from peer Tencent Holdings Ltd. on the impact of chip trade curbs.