Alibaba stock slumps in Hong Kong after $10.2 billion share placement to fund AI

The Hong Kong-listed shares of Alibaba slumped on Monday ​after the Chinese e-commerce and ​cloud computing company launched a $10.2 billion share placement, as ​investors worried about payback from its massive AI spending.

Alibaba said on Sunday its HK$80 billion ($10.21 billion) share placement finalised at HK$112.70 apiece - an 8.4% discount to its Friday ‌close - is ⁠aimed at ⁠funding AI-related development, as it redoubles AI bets amid competition and simmering Sino-U.S. tech ​rivalry.

Its shares fell as much as 10% to HK$110.10 in early Hong Kong trade.


"It's ​negative news in the short-term ... as the share placement dilutes shareholders' interest," said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management.

"In addition, investors ​generally don't like capex ... though the investment ⁠is beneficial ‌in the long term."

The view echoes concern in the ​U.S. where ​investors increasingly question when massive AI spending will generate ⁠returns.

The deal is the largest-ever primary follow-on offering by ​a Hong Kong-listed company and the third-largest globally this ​year after offerings by Alphabet and Intel.

Alibaba intends to use proceeds to fund AI development, including the expansion of related infrastructure.

The share placement comes a week after Alibaba reported quarterly earnings in which it said it had already spent nearly half of its three-year capital expenditure ‌plan. It brought forward its projected payback on AI investment to two and a half years from three due to ​surging demand ​for AI services.

Its ⁠quarterly net profit fell 75% from a year earlier due primarily to AI-related spending.

Last week, digital technology and AI division Alibaba Cloud launched its third ​data centre in South Korea, bringing its network to 104 availability zones across 30 regions. The move was a part of Alibaba's AI infrastructure pledge, announced in October, to invest 380 billion yuan ($56.54 billion) over three years.

(Reporting by Shanghai and Hong Kong Newsroom; Additional reporting by Sherin Sunny; Editing by Christian Schmollinger and Christopher Cushing)