Alibaba shares fell sharply in Hong Kong on Monday after the Chinese e-commerce and cloud computing giant launched a $10.2 billion share sale to finance its artificial intelligence ambitions. The company is offering HK$80 billion ($10.2 billion) of new shares at HK$112.70 each, representing an 8.4% discount to Friday’s closing price. Its shares ended morning trading 9.8% lower at HK$111 as investors focused on dilution and the risks of executing its large-scale AI investment plans.
Despite the sharp market reaction, the offering attracted strong demand, with orders reaching around $28 billion, including $6 billion from long-only and sovereign investors, according to sources familiar with the deal. About 40% of the shares are expected to be allocated to long-only and sovereign investors. The transaction is the largest-ever primary follow-on offering by a Hong Kong-listed company and comes as major global technology firms ramp up spending on AI infrastructure.
Alibaba plans to use the proceeds to develop AI chips, infrastructure and models. The fundraising follows a 75% year-on-year drop in quarterly net profit, largely driven by increased AI-related spending. The company has committed nearly half of its 380 billion yuan ($56.5 billion) three-year capital expenditure plan and has shortened its expected AI investment payback period to two and a half years. The move highlights Alibaba’s determination to compete in AI despite concerns over spending, execution and intensifying competition with U.S. technology giants.
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