Alibaba Shares Tumble 10% After $10.2 Billion Share Placement to Finance AI Expansion

Alibaba shares fell as much as 10% in Hong Kong on Monday after the Chinese technology giant priced an 80 billion Hong Kong dollar ($10.2 billion) placement of newly issued shares to non-U.S. investors.

The company said it intends to allocate all net proceeds toward bolstering its full-stack artificial intelligence capabilities, including expanding and enhancing its AI infrastructure.

Alibaba will issue 710 million new shares at HK$112.70 each, a discount to Friday’s closing price of HK$123. Shares were last trading 8.4% lower at HK$112.70.

The placement, expected to close on Wednesday, follows Alibaba’s report of a 75% profit decline for the June quarter, weighed down by heavy AI spending. Capital expenditure surged 75% to 67.7 billion yuan.

Vey-Sern Ling, senior equity advisor at UBP, told CNBC last week after Alibaba’s latest earnings that the company is well positioned to pursue AI growth. “I think Alibaba clearly is well positioned to chase that growth, given that they have a cloud computing arm and a very strong AI model,” he said, adding that profits may weaken in the near term while capital expenditure could rise.

Alibaba has been accelerating investment in AI as it seeks to make the technology a key driver of future growth. Last year, the company announced plans to invest at least 380 billion yuan in cloud computing and AI infrastructure over the next three years.

Chinese tech peers are also ramping up AI spending. Tencent’s capital expenditure rose 65% from the previous quarter to 52.8 billion yuan in the June quarter as it continued to invest in computing infrastructure to monetize its AI models.

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