Why Is Alibaba Raising $10.2 Billion for AI, Cloud and Chips — Is BABA Stock a Buy?

Alibaba Group is seeking roughly HK$80 billion ($10.2 billion) from a Hong Kong share placement, giving the Chinese technology giant fresh capital to accelerate one of the industry’s most expensive artificial intelligence expansion programs.

The company plans to issue 710 million ordinary shares at HK$112.70 each, a 3.6% discount to the previous closing price. Alibaba said all net proceeds will be invested in its full-stack AI capabilities, including computing infrastructure, chips and the development and deployment of artificial intelligence models. The company’s share placement is expected to become the largest primary follow-on offering by a Hong Kong-listed company.

AI investment is putting pressure on Alibaba’s finances

The capital raise follows a sharp acceleration in spending. Alibaba’s June-quarter capital expenditure climbed about 75% to 67.68 billion yuan, or close to $10 billion, as the company expanded data-center capacity and absorbed higher chip procurement costs. Net profit fell roughly 75% year over year to 10.5 billion yuan.

That pressure comes despite strong demand in the company’s fastest-growing technology businesses. AI Cloud and Compute Services revenue rose 45% to about $7.1 billion, while AI-related product revenue recorded another quarter of triple-digit growth. Alibaba has already deployed roughly half of the 380 billion yuan it previously committed to cloud and AI infrastructure through 2029.