Alibaba Group Holding Ltd (阿里巴巴) raised HK$80 billion (US$10.2 billion) in Hong Kong’s biggest follow-on offering, underscoring its willingness to amass and spend vast sums to take the lead in global artificial intelligence (AI).
The online retail giant-turned-AI player sold 710 million shares at HK$112.70 each and its stock slumped 8.5 percent yesterday, the most since early last year. Still, the deal — which was priced at a 3.6 percent discount to the Friday close of Alibaba’s US-traded shares — attracted demand from institutional investors for almost three times the offering, people familiar with the matter said.
Alibaba would be subject to a lockup of 90 days.
Photo: Reuters
The capital raising reflects Alibaba’s eagerness to outspend and outrun Chinese rivals in the chase to define the frontier of AI development. Among country’s big technology firms, Alibaba has come closest to the huge outlays of its US peers. The company has sold off assets and pledged to spend more than 380 billion yuan (US$56.5 billion) over three years on AI, from chips and data centers to large-language model development. Its flagship Qwen (通義千問) offering is now the world’s most popular model family.
Alibaba’s top two executives both purchased company shares yesterday: Chairman Joseph Tsai (蔡崇信) purchased about HK$80 million worth of shares, while CEO Eddie Wu (吳泳銘) acquired about HK$40 million, filings with the Hong Kong stock exchange showed.
The share issue is a departure from Alibaba’s years-long efforts to improve shareholder returns, Union Bancaire Privee SA managing director Vey-Sern Ling (凌煒森) said.
“Why not bonds?” he asked. “It tells me that they may need more funds than we expect for AI investments and also they may be rushing to be ahead of other companies.”
Chinese AI leaders have so far shown restraint relative to American tech providers such as Meta Platforms Inc and Alphabet Inc, who have together earmarked trillions of dollars in a bid to stay ahead.
Alibaba’s home rival Baidu Inc (百度) has no plan for a new share issuance, as its existing funds and operating cash flow are sufficient, a company spokesperson said yesterday.
However, the competition is intensifying, prices for hardware such as memory chips are skyrocketing and companies are worried about missing out on revolutionary technology.
Alibaba’s concentrated effort to challenge Anthropic PBC and OpenAI is already eroding margins, while anemic domestic consumption dogs its mainstay online retail business. The company amped up its capital spending in the June quarter to nearly US$10 billion and said it is putting the focus on long-term competitiveness.
Some investors question whether Alibaba is getting enough for its capital. Its cloud-computing division is racking up double-digit percentage growth and AI-related revenue gains are in triple-digit territory.
However, like many of its peers, Alibaba has yet to show how it plans to derive sustainable, longer-term revenue from AI services.
The size of Alibaba’s equity raise is “significant,” but possible demand from financial institutions and sovereign-wealth funds should soften some concerns about dilution, Saxo Markets chief investment strategist Charu Chanana said.
“The bigger question is how Alibaba monetizes this spend” given weak Chinese consumer sentiment and intense competition in the country’s AI market, she said.
Alibaba intends to use the proceeds to invest in full-stack AI capabilities, including by expanding and enhancing its infrastructure.