Missed Nvidia in 2009? This Rare Signal Is Flashing Again.<\/strong>\u00a0In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia.\u00a0For the first time in years, that same “Total Conviction” signal is flashing for a company 1\/100th the size of Nvidia.\u00a0Continue \u00bb<\/strong><\/a> <\/p>\n The market’s reaction was quick. Alibaba’s Hong Kong-listed shares fell 8.4% in Monday’s session there, converging almost exactly on the placement price. The U.S.-listed shares held up better, trading about flat as of this writing after a drop in the premarket. <\/p>\n According to Reuters, the deal ranks as the world’s third-largest primary follow-on share sale this year, after offerings from Alphabet<\/strong> (NASDAQ:GOOG)(NASDAQ:GOOGL) and Intel<\/strong> (NASDAQ:INTC), and the largest ever by a Hong Kong-listed company. That list, I’d argue, is the story. The AI build-out has grown past the point where even its richest participants can fund it from cash flow alone. <\/p>\n Image source: Alibaba. <\/p>\n Why Alibaba wants the money <\/p>\n Alibaba isn’t raising cash from a position of weakness in its business. After all, its cloud division’s external revenue<\/a> grew 45% year over year in the June quarter, an acceleration, and the company says its AI-related product revenue has now grown at a triple-digit rate for 12 consecutive quarters. <\/p>\n But the strain shows up below the revenue line. Net income fell 75% year over year to about $1.5 billion last quarter. And free cash flow ran to an outflow of about $6.6 billion, more than double the year-ago quarter’s outflow, as capital expenditures jumped 75% year over year to 67.7 billion yuan. <\/p>\n The scale of the plan explains why. Alibaba committed last year to investing at least 380 billion yuan (more than $50 billion) in cloud and AI infrastructure over three years, and the company said last week it has already spent nearly half of it. Management told investors the expected payback period on its AI investments is on track to fall to about 2.5 years from three, driven by demand. <\/p>\n In other words, selling about 4% more shares (710 million new shares) is the price of keeping that pace without draining the balance sheet. <\/p>\n Story Continues <\/p>\n A three-company pattern <\/p>\n What makes the deal notable is less Alibaba than the pattern it completes. <\/p>\n Alphabet went first, in June, announcing an $84.75 billion equity program made up of $34.75 billion in underwritten public offerings, a $40 billion at-the-market program (a large piece of which covers tax obligations on employee stock awards), and a $10 billion private placement to Berkshire Hathaway<\/strong>. Alphabet’s services generate enormous cash, and the company still chose to sell stock rather than fund this year’s capital expenditures, which it now expects to reach $195 billion to $205 billion, from cash flow alone. <\/p>\n Intel followed in August, pricing a $20 billion common stock sale at $95 per share, upsized from $15 billion the same day on strong demand. The proceeds are for general corporate purposes, including capital expenditures. <\/p>\n Investor appetite for these deals has been striking. Alibaba’s placement was oversubscribed, with sovereign wealth funds among the buyers, and the company increased the deal’s size, according to Reuters. Notably, Intel’s underwriters exercised their full option for additional shares, taking that deal to about $23 billion. <\/p>\n Paying up front <\/p>\n But the aftermarket tells a more cautious story. Intel now trades near $87 as of this writing, about 8% below the price the offering’s buyers paid two weeks ago. And Alibaba’s Hong Kong shares closed Monday’s session almost exactly at the placement price. The U.S. shares, near $119 as of this writing, sit about 38% below their 52-week high of $192.67 even before the new shares land. <\/p>\n Institutions clearly want exposure to AI infrastructure at scale. Existing shareholders, though, absorb about 4% dilution today in exchange for data centers whose returns arrive over years — and only if the payback management describes holds up. <\/p>\n I think the equity funding itself is a rational choice. Stock is expensive capital, but it is permanent, and a build-out this large funded with debt would be far riskier. <\/p>\n But the raise moves the bar. Every new share is a claim that the AI infrastructure will eventually earn its cost, and Alibaba’s cloud growth now has to make good on that. So far, that growth is accelerating. It will need to keep doing exactly that. <\/p>\n Should you buy stock in Alibaba Group right now? <\/p>\n Before you buy stock in Alibaba Group, consider this: <\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/strong><\/a> for investors to buy now\u2026 and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. <\/p>\n Consider when Netflix<\/strong> made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $429,223<\/strong>!* Or when Nvidia<\/strong> made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,317,883<\/strong>!* <\/p>\n Now, it’s worth noting\u00a0Stock Advisor’s total average return is 965% \u2014 a market-crushing outperformance compared to 212% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built by individual investors for individual investors. <\/p>\n See the 10 stocks \u00bb<\/strong><\/a> <\/p>\n *Stock Advisor returns as of August 25, 2026. <\/p>\n Daniel Sparks<\/a> and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, and Intel. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> <\/p>\n