Alibaba Raises $10.2 Billion to Spend Entirely on AI

Alibaba is raising $10.2 billion in a major Hong Kong share placement, with the company pledging to use all net proceeds to bolster its artificial intelligence (AI) capabilities. The offering represents around 3.6% of the company's expanded share capital and is the largest primary follow-on share sale by a Hong Kong-listed company, as well as one of the biggest globally this year.

The fundraising follows Alibaba's recent quarterly net profit decline of 75%, driven by increased spending on AI infrastructure. Capital expenditure surged by 75% to approximately $10.1 billion during the April-June quarter, as the company expanded computing capacity and invested in AI infrastructure. Despite the spending, revenue from Alibaba's cloud and AI business grew by 45% to around $7.2 billion, while AI model services revenue hit over $2.38 billion in annual recurring revenue.

Alibaba CEO Eddie Wu emphasized the need to build sufficient computing capacity to capture future AI growth. The company has already committed approximately $56.5 billion to cloud and AI infrastructure over three years, with roughly half of that amount spent. Alibaba is also increasingly using its own AI chips in data centers, which could reduce costs and improve margins as deployment expands.

The AI infrastructure push extends beyond China, with Alibaba Cloud opening two availability zones in Paris in June, adding to its three major European cloud hubs in Germany and the UK.