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

SHANGHAI, Aug 24 : 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 per cent 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 per cent 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 per cent 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.