Key facts
- Alibaba launched a $10.2 billion share placement to fund AI development.
- The placement is the largest follow-on offering on record in Hong Kong.
- Alibaba's net profit fell 75% in the June quarter, largely due to AI spending.
- Proceeds will fund AI capabilities including infrastructure, chips, and model development.
Alibaba Group's shares fell sharply in Hong Kong after the company announced an 80 billion Hong Kong dollar ($10.2 billion) share placement to fund its artificial intelligence development, including expanding infrastructure, chips, and large-language models. The move, which is the largest follow-on offering on record in Hong Kong, comes amid intense global competition in AI. Investors expressed concerns about shareholder dilution and the significant capital expenditure, despite the potential long-term benefits. The fundraising occurred despite a 75% year-on-year plunge in net profit to $1.6 billion for the April-June quarter, though revenue grew 9% to $39.6 billion, with AI Cloud and Compute services up 45%. Capital expenditure surged 75% to nearly $10 billion in the quarter, largely for AI computing infrastructure. CEO Eddie Wu stated these investments are crucial to meet surging demand for AI computing capacity, aligning with a previous pledge to invest 380 billion yuan ($56 billion) over three years in AI and cloud infrastructure.