Alibaba Group Holding Ltd. announced on Monday a plan to raise approximately HK$80 billion ($10.2 billion) through a new share placement, with the stated purpose of funding its artificial intelligence initiatives. Following the announcement, the company’s shares declined on the Hong Kong Stock Exchange.
In a statement filed with the exchange, Alibaba detailed its plan to issue 710 million new shares priced at HK$112.70 each to non-U.S. investors. The placement price represents a discount from the stock’s closing price of HK$123 on the previous trading day, Friday.
During Monday’s trading session, Alibaba’s share price fell by as much as 10%. The stock ultimately closed at HK$112.70, an 8.4% decrease from Friday’s close. The company stated that the share sale is expected to be finalized on Wednesday.
Alibaba said it intends to use the net proceeds to invest in its “full-stack AI capabilities,” which includes expanding and enhancing its AI infrastructure. This capital raise follows a previous company announcement last year outlining a plan to invest a minimum of 380 billion yuan in cloud computing and AI infrastructure over three years.
The announcement came shortly after Alibaba released its financial results for the June quarter. The earnings report showed a 75% decrease in profit compared to the same period in the prior year. The report also detailed a 75% increase in capital expenditure, which rose to 67.7 billion yuan for the quarter.
Other technology companies in China have also reported increased spending related to artificial intelligence. Tencent Holdings Ltd., in its June-quarter report, noted that its capital expenditure rose 65% from the previous quarter to 52.8 billion yuan. The company attributed the increase to ongoing investments in computing infrastructure to support its AI models.
