Alibaba Group Holding (BABA) seeks to raise about $10 billion in a share sale.

The Chinese e-commerce and cloud computing giant said it will channel 100% of net proceeds into full-stack AI capabilities.

Alibaba Wants to Enter the AI Race

Alibaba is offering 710 million ordinary shares at HK$112.70 each, a 3.6% discount to Friday’s close, according to Bloomberg. The deal would mark the largest-ever primary follow-on offering by a Hong Kong-listed company.

Globally, the deal ranks as the third-largest primary follow-on this year. Only Alphabet’s $80 billion raise in June and Intel’s $15 billion sale in August were bigger.

The full-stack category covers chips, infrastructure, and the development and deployment of AI models. Alibaba will face a 90-day lockup.

Reuters, citing two people familiar with the deal, reported that the offering has drawn strong investor interest, including from sovereign wealth funds.

According to the sources, demand exceeded the initial sale size, prompting Alibaba to increase the offering. Morgan Stanley, HSBC, UBS, and CICC are acting as joint bookrunners.

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AI Spending Squeezes Profit and Cash Flow

The raise arrives as Alibaba’s AI buildout impacts its finances. Quarterly capital spending has climbed to nearly 10 billion.

Meanwhile, the June-quarter net profit plunged 75% to 10.5 billion yuan (1.6 billion). Free cash outflow reached $6.6 billion.

Alibaba has already spent nearly half of its three-year capex plan. However, it expects the payback period for AI investments to shorten from 3 years to 2.5 years, citing surging demand.

Chief Executive Eddie Wu has also been pruning non-core assets to fund the pivot. Alibaba recently sold its gaming arm Lingxi Games to Trustar Capital in a deal reportedly worth at least $1.5 billion.

Meanwhile, the company’s flagship Qwen family became the world’s most popular model lineup this year, per Bloomberg. Whether $10 billion in fresh capital can maintain that lead over US rivals is now the question investors are likely pricing in.

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Source: BeInCrypto