Chinese tech giant Alibaba is set to issue 710 million new shares, aiming to raise HK$80 billion (approximately $10.2 billion). The funds generated from this offering will be exclusively allocated to advancing artificial intelligence, covering areas such as computing infrastructure, proprietary chips, and AI models and applications.
The shares are priced at HK$112.70 each, with the transaction expected to close on August 26, pending standard conditions.
According to Reuters, this issuance marks the largest among additional share offerings by Hong Kong public companies and ranks third globally in 2026, following Alphabet and Intel.
All Proceeds Dedicated to AI Development
The new shares represent around 3.6% of Alibaba's expanded equity capital. The company offered them at a price 8.4% lower than the closing price on Friday, August 21.
In a press release, Alibaba stated that the capital raised would enhance the firm’s capabilities across the entire AI stack.
The funds will also be used for infrastructure required to train and deploy models, with reports from Reuters mentioning the development of the company’s own chips as part of the plan.
However, Alibaba did not disclose how the funds would be allocated among the various initiatives.
Demand for the offering greatly surpassed the available shares, with sources indicating that requests totaled around $28 billion, including approximately $6 billion from long-term and sovereign investors.
Notable participants included Qatar Investment Authority, Norway’s Norges, and Hillhouse, although none of these organizations or Alibaba have confirmed the details.
Alibaba Shares Drop Over 10%
Investors reacted negatively to the dilution of existing shares. On August 24, Alibaba's stock in Hong Kong fell by 10.5% before later reducing losses to align more closely with the discount of the offering.
Source: Yahoo Finance.Investor sentiment is also affected by concerns over the return on rapidly escalating AI expenses.
From April to June, Alibaba's capital expenditures surged by 75% year-on-year, reaching 67.68 billion yuan (around $10 billion). The company attributed this increase primarily to the expansion of its AI infrastructure and processor acquisitions.
During the same quarter, net profit plummeted by 75%.
Conversely, revenue from the AI Cloud and Compute Services division soared by 45%, reaching 48.44 billion yuan ($7.1 billion). Income from AI products alone exceeded $1.8 billion and has been growing at triple-digit rates for the twelfth consecutive quarter, according to the company’s data.
Alibaba Has Already Spent Nearly Half of Its AI Budget
This new offering complements Alibaba’s previously announced investment program.
In February 2025, the company committed to invest at least 380 billion yuan in AI and cloud infrastructure over three years, which Reuters currently estimates to be about $56.5 billion.
By August, Alibaba had already utilized nearly half of the allocated funds.
CEO Eddie Wu explained that the acceleration of spending is necessary to build computing infrastructure in anticipation of future demand.
"To benefit from future growth, we first need to make these capital investments and build the necessary computing capacity," he stated during the quarterly conference.
Alibaba expects these investments to pay off in about three years, or two and a half years if further margin growth occurs.
One strategy to reduce costs involves shifting from purchased processors to in-house solutions like T-Head. Wu noted that increasing their share in data centers should enhance gross margins and profitability in the AI sector.
China Lags Behind the U.S. in Investment Scale
Despite the scale of this new offering, major Chinese tech firms continue to invest significantly less in AI compared to their American counterparts.
According to Capital Group, cumulative AI capital expenditures by Microsoft, Amazon, Alphabet, Meta, and Oracle reached $791 billion by the end of July, while the figure for ByteDance, Alibaba, Tencent, and Baidu stood at $118 billion.
Source: Capital Group.One of the reasons for this gap is the American restrictions on supplying China with the most powerful Nvidia accelerators, which compel local developers to create their own processors and optimize models for lower computational resources.
Alibaba is focusing on multiple fronts: developing its T-Head chips, enhancing cloud infrastructure, creating the Qwen family of models, and launching consumer AI products.
In August, the corporation announced that downloads of its open models had surpassed 3 billion. The company has released over 460 neural networks, which developers have used to create hundreds of thousands of derivatives.
Additionally, Alibaba has decided to sell its gaming division, Lingxi Games, to Trustar Capital, with the potential deal starting at $1.5 billion. This decision is part of a restructuring effort towards AI and cloud technologies.