Alibaba Announces Ambitious Share Placement to Propel AI Investments
(Aug 23): On Sunday, Chinese conglomerate Alibaba disclosed its intention to execute a monumental share placement aimed at raising HK$80 billion (approximately US$10.2 billion or RM41.2 billion) to augment its artificial intelligence endeavors.
This initiative signifies the largest primary follow-on offering ever conducted by a company listed on the Hong Kong stock exchange.
Moreover, it positions itself as the third-largest primary follow-on share sale of the year globally, trailing only behind recent offerings from tech behemoths Alphabet and Intel.
Alibaba articulated that the entirety of the net proceeds from this placement will be allocated towards fortifying its comprehensive AI capabilities—a realm encompassing chip production, infrastructural enhancements, and the advancement and deployment of AI models.
A term sheet examined by Reuters indicated that Alibaba intends to issue 710 million ordinary shares at a price of HK$112.70 per share, reflecting a 3.6% discount relative to its latest closing valuation.
Despite announcing the substantial US$10.2 billion share placement, detailed categorizations of its intended AI investments were not disclosed, leaving analysts and stakeholders speculating about specific allocations.
Beyond the mandatory regulatory disclosures, no further comments were provided by the company.
Last week, Alibaba unveiled its financial performance for the April-to-June fiscal quarter, revealing it had expended nearly half of its planned capital expenditures for the next three years.
The anticipated payback timeline for AI-related investments is expected to decrease to 2.5 years from an earlier projection of three years, a shift driven by escalating market demand.
During this quarter, Alibaba endured a substantial decline in net profit, plummeting 75% compared to the prior year, largely as a result of heightened capital investments in AI.
“To harness future growth opportunities, we first need to execute these capital investments to enhance our computing capabilities,” stated CEO Eddie Wu during the earnings call.
Investor interest in the company’s share offering has been robust, particularly from sovereign wealth funds, as reported by two individuals familiar with the matter who wished to remain anonymous due to the sensitive nature of the information.
Notably, Alibaba expanded the size of the offering following its oversubscription, signifying strong market demand, according to insiders.
A consortium of banks, including Morgan Stanley, HSBC, UBS, and CICC, are acting as joint bookrunners for the offering, although these institutions did not immediately respond to inquiries from Reuters.
It is pertinent to note that the share placement has not been registered under US securities laws, classified as an offshore transaction, thus precluding American investors from participation, Alibaba confirmed.
Since 2022, the global surge in artificial intelligence has catalyzed extraordinary capital investments in infrastructure and data centers across various regions, including the United States and China.
The four dominant US hyperscalers—Microsoft, Amazon, Alphabet, and Meta—are projected to collectively allocate around US$725 billion in capital expenditures by 2026, a substantial portion of which will be directed towards AI data centers, chips, and cloud infrastructure.
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