Alibaba Sells More Shares to Raise $10.2B to Spend on AI

Chinese tech giant Alibaba has accelerated its push into AI, raising about $10.2 billion to spend on AI with newly issued shares.

The move was confirmed in a statement issued by the company on Sunday, which said it wanted to extend its “global AI leadership.”

“Alibaba intends to use 100% of the net proceeds from the equity placement to invest in its full-stack AI capabilities, including to expand and enhance its AI infrastructure,” according to the statement.

The money will come in the form of 710 million new shares issued at $14.38 each, representing an 8.4% discount to the closing price of $15.70 two days earlier. The new shares are equivalent to about 3.7% of Alibaba’s previously issued capital.

Market watchers said the transaction was the largest-ever secondary offering on the Hong Kong exchange, while Bloomberg reported it was the exchange’s largest share sale of any kind since 2021, when tech investment company Prosus sold $14.7 billion of stock in Tencent, another Chinese tech giant. Demand for Alibaba stock was reported to be more than three times the offering size.

The sale was limited to non-U.S. investors -- no surprise given Alibaba’s ongoing regulatory problems in America. In June, it was named on a Department of Defense blacklist that alleged links with the Chinese military, and it is now suing the U.S. government over its inclusion.

The capital will certainly come in useful for Alibaba, given its ambitions. In February last year, it revealed plans to invest $53 billion through 2027 on AI infrastructure and cloud computing.

Just last week, though, the company reported a 75% year-over-year drop in quarterly net income to US$1.5 billion, accompanied by an increase in capital expenditure attributed to the escalating cost of AI infrastructure.

As trading opened in Hong Kong on Monday morning, the initial response to the secondary offer was negative, with share prices dropping by up to 10%.

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