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Alibaba shares drop as the Chinese tech giant issues $10.2 billion in new shares to fund AI infrastructure.

Alibaba shares plunged as much as 10% in Hong Kong following the announcement of an $10.2 billion share placement for non-U.S. investors. The Chinese tech giant plans to use 100% of the net proceeds to enhance its full-stack AI capabilities and infrastructure. This move comes after Alibaba reported a 75% drop in net income for the June quarter, as capital expenditure surged 75% to 67.7 billion yuan due to heavy AI spending. While the company continues to invest heavily in AI to drive future growth, the high costs have resulted in a significant squeeze on profitability and free cash flow. Investor Michael Burry noted that the stock may need to fall another 50% before he would consider buying again, highlighting the tension between massive infrastructure investments and immediate returns. Despite the pressure, Chairman Joseph Tsai and CEO Eddie Wu showed confidence by purchasing a combined $15.08 million in shares following the sale. The transaction is expected to close on August 26.

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