Alibaba falls 8% after US$10 billion Hong Kong share sale to fund AI spending

[BEIJING] Shares of Alibaba fell 8 per cent in early trade on Monday (Aug 24) after the tech company finalised a HK$80 billion (US$10.21 billion) share placement at HK$112.70 apiece, in a deal aimed at funding artificial intelligence-related development.

The Chinese e-commerce and cloud computing company priced 710 million new shares at an 8.4 per cent discount to the last close of its Hong Kong-listed stock.

The deal is the largest-ever primary follow-on offering by a Hong Kong-listed company and the third-largest globally in 2026 so far, after offerings by Alphabet and Intel.

The company said it intends to use 100 per cent of the net proceeds from the placement to invest in its “full stack” AI capabilities, a category that includes chips, infrastructure and the development and deployment of AI models.

Alibaba – which is among the biggest spenders on AI among its Chinese rivals – has been hiving off assets and deploying capital towards everything from chips and data centres to large-language model development.

A term sheet reviewed by Reuters showed that Alibaba plans to sell 710 million ordinary shares at HK$112.70 apiece. That represents a 3.6 per cent discount to its most recent closing price.

In its announcement for the US$10.2 billion share placement, Alibaba did not reveal additional details on its investment plans by category of its planned AI-related investment.

It did not comment beyond its regulatory disclosure.

Last week, Alibaba reported its results for the April-to-June quarter, saying it had already spent nearly half of its three-year capital expenditure investment plan.

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It said its expected payback on AI-related investments was on track to fall to 2.5 years from three years, driven by surging demand.

Alibaba’s net profit for the quarter fell 75 per cent from a year earlier as it ramped up its AI-related capex.

“In order to be able to capture that future growth, we first need to make these ​capex investments to build out the necessary compute capacity,” CEO Eddie Wu said on an earnings call.

The company’s share offering has been met with strong demand from investors, including sovereign wealth funds, two people familiar with the deal told Reuters. They could not be named because the information was not public.

Alibaba increased the size of the offering after the deal was oversubscribed, the people familiar with the matter said. The company will be subject to a lockup of 90 days.

Morgan Stanley, HSBC, UBS and China International Capital Corporation are serving as joint bookrunners of the Alibaba offering, said one of the sources and a third person with knowledge of the matter.

The banks did not immediately respond to a request for comment.

The share placement was not registered under US securities laws as an offshore transaction, meaning American investors were not eligible to participate, Alibaba said.

Since 2022, the global AI boom has fuelled staggering capital outlays on infrastructure and data centres, including in the US and China.

The four major US hyperscalers – Microsoft, Amazon, Alphabet and Meta – together are expected to spend roughly US$725 billion in capex in 2026, much of it tied to AI data centres, chips and cloud infrastructure.

Burry criticises issuance, says he ‘cannot bless’ it

Alibaba’s move has spurred criticism from investor Michael Burry.

The investor, who was made famous in The Big Short, said he “cannot bless” Alibaba’s new share issuance in response to the firm’s announcement.

“This is a new paradigm again for BABA, and its ROIC will continue to fall,” he wrote in a social media post on Sunday. 

According to Burry, he had planned to flip back most of his entire Alibaba position that he had moved to JD.com “not too long ago” but “no longer” has the intention.

Alibaba would have to fall by half for him to get interested again, Burry added. REUTERS, BLOOMBERG