Alibaba Group is raising roughly HK$80 billion ($10.2 billion) through a Hong Kong share placement to accelerate its full-stack artificial intelligence expansion, but the share sale announced alongside surging AI capital spending has triggered a sharp selloff in its Hong Kong-listed stock.
The company plans to issue 710 million ordinary shares at HK$112.70 each, a 3.6% discount to Friday’s close. All net proceeds will be invested in AI capabilities, including computing infrastructure, chips, and AI model development and deployment. The transaction is expected to become the largest primary follow-on offering by a Hong Kong-listed company, with strong demand reportedly prompting Alibaba to enlarge the deal. Morgan Stanley, HSBC, UBS, and CICC are acting as bookrunners.
The capital raise follows a dramatic increase in spending. Alibaba’s June-quarter capital expenditure climbed about 75% year over year to 67.68 billion yuan, close to $10 billion. Net profit fell roughly 75% to 10.5 billion yuan. Yet demand remains strong: AI Cloud and Compute Services revenue rose 45% to about $7.1 billion, while AI-related product revenue recorded another quarter of triple-digit growth. Alibaba has already deployed about half of the 380 billion yuan it previously committed to cloud and AI infrastructure through 2029.
On the Hong Kong exchange, Alibaba shares plunged to HK$111, the lowest since July 30 and down from a monthly high of HK$130.1. The stock has slumped more than 40% from its highest level last year. Traders cited both the earnings report and shareholder dilution from the placement. Revenue for the quarter rose 9% to over 268 billion RMB, e-commerce revenue increased 4%, and AI labs and applications revenue grew 16%. However, income from operations dropped 57% to over 15.1 billion RMB.
There are signs the AI investments are beginning to pay off. Alibaba’s models have reportedly reached about 3 billion downloads, surpassing companies like Meta Platforms and Google. The company also has a partnership with Apple, which uses Alibaba models in China, and its recent models are considered competitive with Anthropic’s Fable. At the same time, competition from Moonshot, DeepSeek, and MiniMax remains intense and could lead to price wars that pressure margins.
Alibaba also announced the sale of its gaming studio Lingxi Games to Trustar Capital Group as part of its focus on AI. The company’s financing strategy reflects a broader global shift: AI leadership increasingly depends on access to chips, electricity, data centers, and funding. The article noted that former Bitcoin miners are increasingly converting data-center capacity toward AI computing, while Nvidia investors scrutinize the financing needed to sustain the broader AI infrastructure buildout. Technical analysis shows Alibaba formed a double-top pattern, fell below the 50-day moving average, and the RSI moved below 50, pointing to possible downside toward HK$100 unless the stock reclaims HK$130.
