Alibaba shares plunged as much as 10 per cent in Hong Kong on Monday after the Chinese technology giant announced an HK$80 billion ($10.2 billion) placement of newly issued shares to non-US investors.
The company said it would use all net proceeds from the share sale to strengthen its full-stack artificial intelligence capabilities, including expanding and enhancing its AI infrastructure.
Alibaba will issue 710 million new shares at HK$112.70 each, representing a discount to Friday’s closing price of HK$123.
The stock was last trading 8.4 per cent lower at HK$112.70, with the placement expected to close on Wednesday.
The fundraising comes days after Alibaba reported a 75 per cent decline in profit for the June quarter, as heavy investment in artificial intelligence weighed on its financial performance.
Capital expenditure surged 75 per cent to 67.7 billion yuan during the quarter, reflecting the company’s accelerated spending on AI and computing infrastructure.
Alibaba has been increasing investment in AI as it seeks to make the technology a major driver of future growth.
The company announced last year that it planned to invest at least 380 billion yuan in cloud computing and AI infrastructure over three years.
Speaking after Alibaba’s latest earnings, Vey-Sern Ling, senior equity adviser at UBP, said the company was well positioned to pursue growth in artificial intelligence because of its cloud computing business and AI models.
“I think Alibaba clearly is well positioned to chase that growth, given that they have a cloud computing arm, they have a very strong AI model,” he said.
Ling added that Alibaba’s profits could weaken in the near term as capital expenditure continues to rise.
Alibaba’s increased AI spending mirrors a broader investment push among Chinese technology companies.
Tencent’s capital expenditure rose 65 per cent from the previous quarter to 52.8 billion yuan in the June quarter, as the company continued investing in computing infrastructure to commercialise its AI models.
Boluwatife Enome
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