Alibaba launches HK$80 billion share placement

Alibaba, the Chinese e-commerce giant, has launched a HK$80 billion (US$10.2 billion) share placement to fund its artificial intelligence (AI) development. The shares initially fell eight percent to HK$113.00 upon the market's opening, but later closed at HK$123.00 on Friday. This move is expected to be the largest primary follow-on offering by a Hong Kong-listed company and the third-largest worldwide this year, following offerings from Alphabet and Intel.

Alibaba plans to allocate all net proceeds from the placement towards enhancing its full-stack AI capabilities, including chips, infrastructure, and AI model development.

The company has not disclosed further details on its AI-related investment plans. Alibaba's net profit for the April-to-June quarter fell 75 percent year-over-year, but it expects the payback period for AI-related investments to decrease to 2.5 years from the initial forecast of three years. This decrease in payback period is attributed to the rising demand for AI services.

The share placement attracted strong interest from investors, including sovereign wealth funds, but American investors were ineligible to participate due to the non-registration under US securities laws for offshore transactions. Alibaba's CEO, Eddie Wu, stated that the company needs to invest in AI-related capex to capture future growth, and the share offering will enable them to build the necessary compute capacity.