Alibaba chip unit T-Head files Hong Kong IPO plan amid China’s AI self-sufficiency drive

Alibaba Group Holding’s chip design unit T-Head has filed for an initial public offering (IPO) on a confidential basis in Hong Kong, the company said in a stock-exchange filing on Tuesday evening, setting up a high-profile listing in the city amid rising competition between the US and China as the latter continues its push for tech self-sufficiency.

The size and structure of the listing were not finalised.

A wholly owned subsidiary of Alibaba, T-Head provides full-stack data centre chips, enabling system-level compute solutions in China. Following completion of the proposed spin-off, it is expected to remain a subsidiary of Alibaba.

Founded in 2018, T-Head is poised to become the first stand-alone unit to explore an IPO following Alibaba’s sweeping corporate restructuring that began in 2023. Alibaba owns the South China Morning Post.

Alibaba said in the filing that the spin-off and listing would be beneficial to the group and T-Head by enhancing the spin-off’s stand-alone profile among its customers, suppliers and potential strategic partners, putting it into “a better position to negotiate and solicit more business”.

The listing would allow T-Head to “directly and independently access both equity and debt capital markets in the future on a stand-alone basis should the need arise”, it added.

The spin-off and IPO proposal would also enhance the firm’s ability to secure bank credit facilities, allowing for a more efficient deployment of the Alibaba’s financial resources.

“By tapping the public market for funding, T-Head brings in external capital, avoiding the need for the group to shoulder heavy capital expenditures alone and helping diversify R&D risks,” said Mike Leung, investment manager at Wocom Securities.

Alibaba’s third-quarter earnings are due on November 19, with Goldman Sachs projecting revenue from its AI and cloud division, which includes T-Head, would surge 53 per cent year on year.

In August, Alibaba raised HK$80 billion (US$10.2 billion) through a share placement, its first since listing in Hong Kong in 2019, saying it would allocate all proceeds to enhancing its “full-stack AI capabilities” and expanding its “global AI leadership”.

The T-Head listing will be one of the most closely watched in Hong Kong’s IPO market.

Driven by mainland China’s push for tech self-reliance and an influx of AI supply-chain firms, total IPO fundraising in Hong Kong reached HK$403.9 billion in the first 10 months of the year, nearing the record set in 2010, according to bourse operator Hong Kong Exchanges and Clearing. IPO activity cooled significantly in the fourth quarter.

That listing was still awaiting approval from the China Securities Regulatory Commission, according to people familiar with the matter.

Leung said the main headwinds facing major semiconductor IPOs remained volatile market valuations and uncertainty surrounding sluggish regulatory clearance.

A confidential IPO filing in Hong Kong allows a company to submit draft listing documents for regulatory review without immediately publishing them on the exchange’s public news website.