Key facts
- Alibaba announced a share placement to raise approximately $12 billion to fund its AI expansion.
- The placement involves selling 710 million new shares at HK$112.7 each, an 8.4% discount.
- Net proceeds of HK$79.7 billion will be used for AI capabilities and infrastructure.
- Alibaba's stock fell as much as 10% following the announcement.
- Michael Burry sold his entire stake in Alibaba, citing concerns over dilution and capital expenditure.
- Alibaba launched its new AI video generation model, Wan3.0.
Alibaba Group Holding Ltd. announced it will raise approximately 80 billion yuan ($12 billion) through a share placement to finance its artificial intelligence expansion. The company plans to sell 710 million new shares to investors outside the U.S. at HK$112.7 ($14.4) apiece, an 8.4% discount to the stock’s Aug. 21 close. The net proceeds of HK$79.7 billion will be used entirely to build out its full-stack AI capabilities and related infrastructure.
Alibaba's stock fell 8.5% in Hong Kong trading following the announcement, with investors weighing the significant cost of its AI push. The placement is the largest follow-on offering on record in Hong Kong. "Big Short" investor Michael Burry revealed he has sold his entire stake in Alibaba, citing concerns over the company's capital expenditure and shareholder dilution. He has moved his position into rival Chinese e-commerce company JD.com.
Alibaba's recent financial results highlighted the expense of its AI ambitions. In the June quarter, revenue rose 9% to $39.6 billion, but net profit plunged 75% year-on-year to $1.6 billion. This decline was attributed to a 75% surge in capital expenditure, reaching nearly $10 billion for the quarter, reflecting a broader industry trend of massive investment in AI infrastructure by major tech companies.
Alibaba Cloud officially rolled out its latest AI video generation model, Wan3.0, which can generate 30-second videos from various documents and web pages. The model has been in use for drama production, advertising, and music videos since its public beta launch on August 6.
Despite enthusiasm for its AI endeavors, Alibaba's stock has faced pressure, trading significantly below its 2020 peak due to China's tech crackdown, a slowing economy, intense e-commerce competition, and geopolitical tensions. The company has pledged 380 billion yuan over three years for AI and cloud infrastructure.