Alibaba Raises $10.2B for AI in Record Hong Kong Share Sale

Alibaba has launched a HK$80-billion ($10.2 billion) share placement to fund artificial intelligence-related development. The deal would mark the largest-ever primary follow-on offering by a Hong Kong-listed company and rank as the world's third-largest primary follow-on share sale this year after offerings from Alphabet and Intel.

Alibaba plans to sell 710 million shares at a discount. The company intends to sell the shares at HK$112.70 each, representing a 3.6% discount to its most recent closing price. A term sheet reviewed by Reuters showed the pricing and volume details for the placement announced on Sunday.

The e-commerce and cloud computing giant said it will use 100% of the net proceeds to invest in its "full stack" AI capabilities. That category includes chips, infrastructure and the development and deployment of AI models. Alibaba did not reveal additional details on its investment plans by category.

The offering drew strong demand from investors. The share placement has been met with strong demand from investors, including sovereign wealth funds, according to two people familiar with the deal. Alibaba increased the size of the offering after it was oversubscribed.

Morgan Stanley, HSBC, UBS and CICC are serving as joint bookrunners. The banks did not immediately respond to a Reuters request for comment. The share placement was not registered under U.S. securities laws as an offshore transaction, meaning American investors were not eligible to participate.

Alibaba's recent earnings showed heavy AI spending. Last week, the company reported its April-to-June quarter results, saying it had already spent nearly half of its three-year capex investment plan. Its expected payback on AI-related investments was on track to fall to 2.5 years from 3 years, driven by surging demand. Net profit for the quarter fell 75% from a year earlier as it ramped up AI-related capital expenditures.

"In order to be able to capture that future growth, we first need to make these capex investments to build out the necessary compute capacity," CEO Eddie Wu said on an earnings call. The company did not comment beyond its regulatory disclosure on the share sale.