Alibaba (BABA), the Chinese e-commerce and cloud computing giant, recently completed a large-scale new share placement, making it the third largest listed company secondary offering globally this year. The capital raised by the three largest such transactions so far this year has been directed with near-perfect alignment—all toward the field of artificial intelligence.
Over the past weekend, Alibaba priced its placement of HKD 8 billion (approximately USD 10.2 billion), issuing 710 million new shares at HKD 112.70 per share. The company explicitly stated that 100% of the net proceeds will be used to strengthen its full-stack AI capabilities, with a particular emphasis on expanding AI infrastructure. The transaction is expected to close this Wednesday.
The market responded swiftly. In Monday trading, Alibaba’s Hong Kong-listed shares fell sharply by 8.4%, with the closing price landing almost precisely near the placement price. Its U.S.-listed shares showed greater resilience, recovering most of their pre-market losses as of press time.
This transaction ranks third globally in scale, following similar financings by Google parent Alphabet (GOOG) (GOOGL) and Intel (INTC), and represents the largest secondary offering in the history of Hong Kong-listed companies. This series of actions clearly indicates that the capital demand for AI development is already immense—so much so that even the wealthiest players in the industry cannot sustain all their investments through cash flow alone.
Alibaba’s latest financing does not stem from business weakness. Its cloud division’s external revenue grew 45% year-over-year in the quarter ending June, with accelerating momentum, and AI-related product revenue has maintained triple-digit growth for 12 consecutive quarters. However, funding pressure has emerged on the profit side: net profit in the last quarter plunged 75% year-over-year to approximately USD 1.5 billion; free cash flow outflow reached about USD 6.6 billion, more than double the same period last year, while capital expenditures surged 75% year-over-year to RMB 67.7 billion during the same quarter.
This is directly tied to its investment plans. Alibaba last year committed to investing at least RMB 380 billion (over USD 50 billion) in cloud and AI infrastructure over three years, and last week the company stated that nearly half has already been spent. Management has told investors that, driven by demand, the expected return period on its AI investments could shorten from three years to about 2.5 years. In other words, this placement of approximately 4% of its shares (710 million shares) represents a strategic choice to maintain investment momentum while avoiding excessive depletion of its balance sheet.
What makes this transaction more noteworthy is the pattern it reveals. In June this year, Alphabet first announced an equity financing plan totaling USD 84.75 billion, including public underwriting, at-the-market offerings, and a private placement to Berkshire Hathaway. Despite its strong cash-generating capabilities, the company chose to raise funds through share sales rather than relying entirely on cash flow to meet its expected capital expenditures of USD 195 billion to USD 205 billion this year. Then in August, Intel priced a USD 20 billion common stock sale at USD 95 per share, expanding the size on the same day due to strong demand, with proceeds used for general corporate purposes including capital expenditures.
Investor subscription enthusiasm for these transactions has been remarkable. Alibaba’s placement was oversubscribed, with buyers including sovereign wealth funds, and the company increased the transaction size. Notably, Intel’s underwriters fully exercised their additional allotment option, bringing the total size to approximately USD 23 billion.
