China’s tech giant Alibaba has launched a massive HK$80 billion ($10.2 billion) share placement to fund advancements in artificial intelligence. This move marks the largest-ever primary follow-on offering by a Hong Kong-listed company and the third-largest primary follow-on share sale globally this year, following offerings from Alphabet and Intel.
The company plans to use 100% of the net proceeds from the placement to invest in its “full stack” AI capabilities, which includes chips, infrastructure, and the development and deployment of AI models. Alibaba intends to sell 710 million ordinary shares at HK$112.70 a share, representing a 3.6% discount to its most recent closing price.
Although Alibaba did not disclose specific details regarding its AI-related investment plans, the company reported significant progress in its AI initiatives. Last week, Alibaba revealed that it had already spent nearly half of its three-year capex investment plan, with expected payback on AI-related investments set to decrease to 2.5 years from 3 years.
Alibaba’s CEO, Eddie Wu, emphasized the importance of building necessary compute capacity to capture future growth, despite a 75% decrease in net profit for the quarter due to increased AI-related capital expenditures. The company’s share offering has garnered strong demand from investors, including sovereign wealth funds, leading to an increase in the size of the offering after oversubscription.
Morgan Stanley, HSBC, UBS, and CICC are serving as joint bookrunners for the Alibaba offering. The share placement was not registered under U.S. securities laws as an offshore transaction, making American investors ineligible to participate.
The global AI boom has fueled significant capital outlays on infrastructure and data centers, with major players like Microsoft, Amazon, Alphabet, and Meta expected to spend roughly $725 billion in capital expenditures by 2026, much of it tied to AI data centers, chips, and cloud infrastructure.
In conclusion, Alibaba’s strategic move to fund AI development through a massive share placement underscores the company’s commitment to advancing technology and innovation. As the global AI landscape continues to evolve, Alibaba is positioning itself to remain at the forefront of this transformative industry.
