Investing.com-- Alibaba shares fell sharply in Hong Kong trade on Monday after the New York Times reported that the Donald Trump administration was scrutinizing the Chinese firm’s artificial intelligence deal with Apple Inc (NASDAQ: AAPL ).

Alibaba Group (HK: 9988 )(NYSE: BABA ) shares fell 3.8% to HK$118.60, and were the biggest weight on the Hang Seng , which lost about 0.2%. The U.S.-listed shares opened 1.2% lower in premarket trade Monday.

The NYT reported that the White House was scrutinizing Alibaba and Apple’s recent agreement to put Alibaba’s AI on Apple’s iPhones in China. Officials were concerned that the deal could help a Chinese company improve its AI capabilities, broaden the reach of its AI bots and further increase Apple’s exposure to Chinese data laws and censorship.

For Alibaba, the Apple tie-up presents a means to gain an edge over its AI competitors in China, given that it will expose Alibaba’s flagship AI models to Apple’s massive userbase in the country.

Any blocking of the deal stands to stymie Alibaba’s AI ambitions, which already appear to be in question after the company’s cloud unit clocked disappointing earnings for the March quarter.

For Apple, the Alibaba deal presented a means to finally roll out its long-delayed Apple Intelligence AI features in China, which is the company’s biggest market after North America.

Apple has struggled to fully roll out its AI features on its iPhones, with the features currently available having fallen short of the company’s promises. But in China, Apple has not rolled out any AI features, given that the company needs to tie-up with a local firm to meet regulatory requirements.

Alibaba was announced as Apple’s AI partner earlier this year, although it was not immediately clear whether the company had begun incorporating Alibaba’s AI models into its devices.

Outside China, Apple’s AI features use OpenAI models.