Alibaba Group (NYSE:BABA) Holding Ltd shares fell sharply in Hong Kong after the Chinese technology group priced a HK$80 billion (US$10.2 billion) equity placement to finance further investment in artificial intelligence.
The company will issue 710 million new ordinary shares to investors outside the US at HK$112.70 each, an 8.4% discount to Friday’s HK$123 closing price.
Alibaba shares dropped 8.1% to HK$113 in early trading on Monday, reflecting concerns about shareholder dilution and the mounting cost of competing in AI. The new shares are equivalent to around 3.7% of Alibaba’s existing issued capital.
Alibaba said it would invest all the net proceeds in its “full-stack” AI capabilities, including expanding and upgrading the computing infrastructure supporting its Qwen models and cloud services. Completion is expected on August 26, subject to customary conditions.
The fundraising follows a sharp increase in investment during the June quarter. Capital expenditure rose 75% to 67.68 billion yuan, largely because of spending on AI infrastructure and higher chip costs.
That contributed to a free cash outflow of 44.67 billion yuan, compared with an 18.82 billion yuan outflow a year earlier. Net profit fell 75% to 10.44 billion yuan, although revenue increased 9% to 268.95 billion yuan.
Alibaba’s AI cloud and computing-services revenue grew 45% to 48.44 billion yuan, while AI-related product revenue recorded triple-digit growth for a 12th consecutive quarter. The group is betting that this demand will ultimately justify its rapidly expanding infrastructure bill.
