Alibaba shares plunge 10% after $10.2 billion share placement to fund AI push
Alibaba shares fell 10% following a $10.2 billion share placement intended to fund aggressive investments in AI infrastructure. The move comes amid a significant drop in quarterly profits as the company prioritizes long-term AI growth.
Why it matters
The market reaction underscores investor concerns regarding the high capital expenditure required for Chinese tech giants to remain competitive in the global AI race.
Alibaba shares plunged as much as 10% in Hong Kong on Monday after the Chinese tech giant priced an 80 billion Hong Kong dollar ($10.20 billion) placement of newly issued shares to non-U.S. investors.
The company said it plans to use all of the net proceeds to invest in its full-stack AI capabilities, including expanding and enhancing its AI infrastructure.
Alibaba will issue 710 million new shares at HK$112.70 apiece, compared with the stock's Friday closing price of HK$123. Shares were last trading 8.4% lower at HK$112.7.
The share placement, expected to close on Wednesday, comes just days after Alibaba reported a 75% drop in profit for the June-quarter as heavy AI spending weighed on its results. Capital expenditure jumped 75% to 67.7 billion yuan.
Alibaba's U.S. listed shares fell 3.4% in premarket trading.
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