Alibaba to raise $10B via share sale for AI purposes
What's the story
Chinese e-commerce and cloud computing giant Alibaba has announced plans to raise HK$80 billion (around $10.2 billion) through a share placement. The move, if successful, would be the largest primary follow-on offering by a Hong Kong-listed company and the third-largest globally this year after Alphabet and Intel's offerings. The company intends to use 100% of the net proceeds from the placement to invest in its "full stack" artificial intelligence capabilities, which include chips, infrastructure, and AI model development and deployment.
Offering specifics
Offering has seen strong demand from investors
According to a term sheet reviewed by Reuters, Alibaba plans to sell 710 million ordinary shares at HK$112.70 each, a 3.6% discount on its last closing price.
The company did not disclose further details on its investment plans beyond regulatory requirements.
However, the share offering has attracted strong demand from investors including sovereign wealth funds, leading Alibaba to increase the size of the offering after it was oversubscribed.
Financial outlook
Alibaba's net profit dropped by 75% YoY
Last week, Alibaba announced its results for the April-to-June quarter, revealing a 75% year-on-year drop in net profit as it ramped up AI-related capital expenditure.
The company has already spent nearly half of its three-year capital expenditure investment plan.
Despite this, CEO Eddie Wu said on an earnings call that "in order to be able to capture that future growth" they need to make these capex investments.
Industry spending
Hyperscalers' expected capex in 2026
Since 2022, the global AI boom has led to massive capital expenditures on infrastructure and data centers.
In 2026, four major US hyperscalers, Microsoft, Amazon, Alphabet, and Meta, are expected to spend around $725 billion in capex.
Much of this expenditure is linked to AI data centers, chips and cloud infrastructure.