Alibaba Group Holding (NYSE:BABA) shares tumbled as much as 10% in Hong Kong on Monday after the company finalised a HK$80 billion ($10.21 billion) placement of new shares to fund artificial intelligence investment.
The Chinese ecommerce and cloud group priced 710 million new shares at HK$112.70 apiece, a discount to Friday's closing price of HK$123, in what Bloomberg called Hong Kong's biggest secondary share sale on record.
Alibaba said it would direct 100% of net proceeds toward its "full-stack" AI capabilities, including expanding and enhancing AI infrastructure, with the placement expected to close Wednesday.
The raise lands days after Alibaba reported a 75% drop in quarterly profit for the June quarter, as capital expenditure jumped 75% to 67.7 billion yuan.
It extends a spending cycle that has already seen roughly RMB120 billion deployed across four quarters toward AI and cloud infrastructure, part of a pledge to invest at least 380 billion yuan over three years.
The move mirrors a broader scramble among Chinese tech peers, including Tencent, to fund the infrastructure race as competition with Western AI developers intensifies.
News Intelligence what this means for the company
Alibaba raised $10.21 billion via Hong Kong's largest secondary share sale on record, pricing 710 million shares at an 8.4% discount to Friday's close, with all proceeds earmarked for full-stack AI infrastructure. The placement lands immediately after the company reported a 75% profit collapse for Q2 and a 75% jump in quarterly capex to 67.7 billion yuan—signaling that near-term earnings will face continued pressure as the company executes on a three-year, 380 billion yuan AI infrastructure commitment already 120 billion yuan into deployment.
- The 10% intraday share drop reflects dilution and market skepticism about near-term profitability recovery, despite management's AI positioning.
The raise confirms Alibaba is willing to sacrifice near-term shareholder returns to fund a multi-year capex cycle in a competitive AI infrastructure race. Investors must now assess whether the company's cloud and AI model capabilities justify the earnings headwind and dilution through at least 2027.
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