Alibaba shares slide after US$10.2 billion AI share sale offered at sharp discount

[SHANGHAI] China’s Alibaba shares slumped in Monday (Aug 24) Hong Kong trade after it launched a US$10.2 billion share sale at a sharp discount to fund its AI ambitions, with investors focused on stock dilution and execution risks.

The e-commerce and cloud computing giant said it would be offering HK$80 billion (US$10.2 billion) in new shares at HK$112.70 apiece – an 8.4 per cent discount to its Friday close – to fund development of chips, AI infrastructure and models.

Its Hong Kong shares were down 9.1 per cent at HK$111.8 in afternoon trade.

AI has become Alibaba’s biggest driver of revenue growth at a time when e-commerce growth is stagnating, and its Qwen AI models are some of the most popular in China. Even so, some investors have their reservations about just how successful it will be.

“Alibaba’s DNA is in e-commerce, not advanced tech,” said Yang Tingwu, vice-general manager of asset manager Tongheng Investment.

“No matter how much it invests in AI hardware, it will likely be outmanoeuvered by competitors in tech innovation.”

The offering has nevertheless drawn strong demand, attracting US$28 billion of orders, including US$6 billion from long-only and sovereign investors, three people with knowledge of the matter said.

About 40 per cent of the book will be allocated to long-only and sovereign investors, including major sovereign wealth funds in Europe, Asia and the Middle East, two of the people said.

Investors included the Qatar Investment Authority (QIA), Norway’s Norges and Hillhouse, according to one person.

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Alibaba, Hillhouse, QIA and Norges did not immediately respond to requests for comment.

Chinese AI investment still small by comparison

As the US and China vie for tech supremacy, investment in AI and related infrastructure such as data centres has reached dizzying heights.

The biggest Chinese AI names are, however, investing only a fraction of what their US counterparts are doing.

Most fundraising globally is also conducted via heavy debt issuance – a trend that has begun to test the limits of investor demand. Japan’s SoftBank on Monday announced it would issue US$6.3 billion in bonds to retail investors – its biggest such offering to date.

Alibaba’s stock sale is the largest-ever primary follow-on offering by a Hong Kong-listed company and the third-largest globally in 2026 after offerings of nearly US$85 billion from Alphabet and US$20 billion from Intel.

“Alibaba’s placement – landing alongside massive capital raises by Alphabet and Intel in the US – proves that American and Chinese tech giants are operating off the exact same strategic playbook,” said Winston Ma, an adjunct professor at NYU School of Law and former head of North America for sovereign wealth fund China Investment Corp.

“The global sovereign investors aren’t blind to US-China tech friction – they are compartmentalising it,” Ma said, adding that they were more comfortable with compliance issues when investing in Chinese commercial cloud and open-weight AI plays over restricted semiconductor hardware.

Capital Group, one of the world’s largest active investment managers, estimates that AI-related capital expenditure by the biggest US hyperscalers – Microsoft, Amazon, Alphabet, Meta and Oracle – reached US$791 billion as of Jul 31. That compares with US$118 billion for China’s ByteDance, Alibaba, Tencent and Baidu.

Chinese firms become nimbler without Nvidia

Part of the reason for the more subdued Chinese spending has been lack of access to the most advanced Nvidia chips due to US export controls. That in turn has pushed them to develop more efficient models and infrastructure that require less computing power and capital.

The share placement comes a week after Alibaba reported quarterly net profit that fell 75 per cent from a year earlier due primarily to AI-related spending.

Underscoring how AI has leapt to become a key priority, Alibaba in 2026 separated its AI operations from its cloud business, with the new unit to be led by CEO Eddie Wu.

In addition to positioning itself as a key AI partner for companies operating in China, it is preparing a listing of its chipmaking arm T-Head and developing AI agents linking services across its sprawling ecosystem, including shopping, food delivery, travel and entertainment.

Separately, Alibaba has helped train a large language model that Apple will sell in the Chinese market, sources have said.

At earnings in July, Alibaba said it had committed nearly half of its three-year capital expenditure plan of 380 billion yuan (US$56.5 billion), but that AI computing investments have a “high certainty” of returns.

Wu said such investments are expected to break even within three years, possibly even 2½ years, as margins improve and proprietary chips replace third-party hardware. REUTERS