Alibaba shares fell sharply in Hong Kong on Monday after the Chinese technology giant announced a $10.2 billion share sale to finance its push into artificial intelligence, with investors reacting to the steep discount and concerns about how effectively the company can turn its huge AI spending into growth.
Alibaba said it would raise HK$80 billion ($10.2 billion) by issuing new shares at HK$112.70 each. The price was 8.4% below Friday’s closing price.
The stock dropped as much as 9.8% during Monday morning trading, ending the session at HK$111.
Alibaba plans to use the money to develop AI chips, build infrastructure and invest in AI models as competition in the technology sector intensifies.
The fundraising comes as investors are increasingly willing to put money into artificial intelligence but are also becoming more cautious about the enormous costs involved.
“Alibaba’s DNA is in e-commerce, not advanced tech,” said Yang Tingwu, vice general manager of asset manager Tongheng Investment.
He said the company could struggle to keep pace with rivals in technology innovation despite its planned spending on AI hardware.
Despite the share-price drop, demand for the deal was reportedly strong.
The order book attracted about $28 billion in investor orders, including around $6 billion from long-only funds and sovereign investors, according to three people familiar with the deal who declined to be identified because the details were confidential.
About 40% of the shares are expected to go to long-only and sovereign investors, two of the sources said. Major sovereign wealth funds from Europe, Asia and the Middle East were among the investors, they added.
Alibaba did not immediately respond to a request for comment.
The fundraising is the largest primary follow-on share offering ever by a company listed in Hong Kong, according to the sources. Globally, it ranks as the third-largest offering this year, behind Alphabet’s nearly $85 billion offering and Intel’s $20 billion deal.
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The size of Alibaba’s fundraising shows just how much money technology companies are now prepared to commit to the AI race.
Winston Ma, an adjunct professor at NYU School of Law and former head of North America for sovereign wealth fund China Investment Corp, said Alibaba’s deal showed that major Chinese and U.S. technology companies were following similar strategies as they race to build AI capabilities.
He said global sovereign investors were not ignoring U.S.-China technology tensions, but were becoming more selective about where they put their money.
Investors, Ma said, appeared more comfortable with Chinese commercial cloud services and open-weight AI models than with restricted semiconductor hardware, where U.S.-China technology restrictions remain a major concern.
For Alibaba, however, the immediate question is whether the billions being poured into AI will eventually translate into stronger earnings and justify the dilution faced by existing shareholders.
About the Author
Cecilia Attah is a tech analyst with a degree from Benue State University. She covers tech news and startups at TechRegard with a focus on how technology is transforming Africa and shaping the global landscape.
