Alibaba Shares Slide After Announcing $10.2 Billion AI-Focused Share Sale

Alibaba's shares tumbled in Hong Kong after the e-commerce giant announced a $10.2 billion share sale to finance its AI initiatives. The offering, priced at a discount, has raised investor concerns about stock dilution and the company's ability to execute its ambitious AI strategy.

The company plans to sell HK$80 billion ($10.2 billion) of new shares at HK$112.70 each, an 8.4% discount to Friday's closing price. These funds are earmarked for acquiring chips, building AI infrastructure, and developing AI models. AI has become a crucial growth driver for Alibaba, particularly as its core e-commerce business experiences slowing growth.

Despite the strategic importance of AI, some investors remain skeptical. Yang Tingwu, vice general manager of Tongheng Investment, noted that Alibaba's core strength lies in e-commerce, not advanced technology, suggesting competitors might outmaneuver the company in innovation regardless of investment levels.

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Alibaba's DNA is in e-commerce, not advanced tech. No matter how much it invests in AI hardware, it will likely be outmaneuvered by competitors in tech innovation.

Alibaba's Hong Kong shares initially dropped as much as 10.5% but later recovered some losses. The sale of 710 million ordinary shares represents 3.6% of the enlarged total shares outstanding. The offering has reportedly attracted significant demand, with $28 billion in orders, including substantial contributions from long-only and sovereign investors. Notable investors mentioned include Qatar Investment Authority and Norway's Norges wealth fund.

This share sale marks the largest follow-on offering of new shares by a Hong Kong-listed company and ranks as the third-largest globally this year, following major capital raises by Alphabet and Intel. The move underscores the intense competition and massive investment in AI infrastructure between the US and China, with both tech giants pursuing similar strategies.

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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.