Artificial intelligence is rapidly changing the priorities of major technology groups. In China, Alibaba is preparing a new stage with a fundraising of 10 billion dollars. The move now comes as investments in technology are sharply reducing profits and cash flow. The group is therefore looking for new ways to support its expansion while accelerating its technological capabilities.
In brief
- Alibaba is preparing a $10 billion fundraising to accelerate its expansion in AI.
- The group wants to adopt a “full-stack” strategy, covering chips, infrastructure and AI models.
- Investments in AI are weighing on its books, with a 75% drop in net profit in the June quarter.
- Alibaba plans to reduce the return on investment time for its AI projects from three years to two and a half years.
- The Qwen range becomes a central element of this strategy, as the group reorganizes its assets.
Alibaba accelerates its AI offensive
Alibaba is offering 710 million ordinary shares at a price of HK$112.70 per share, according to a report from Bloomberg. This amount represents a discount of 3.6% compared to Friday’s closing price. The operation could become the largest capital increase ever carried out by a company listed in Hong Kong. Above all, it shows the scale of the resources necessary to develop a complete strategy around AI.
Globally, this transaction ranks third among the largest transactions cited this year. Only Alphabet’s $80 billion fundraising in June and the sale of Intel for $15 billion in August exceed it. This approach covers chips, infrastructure, and the development and deployment of AI models.
This mechanism governs the availability of the actions concerned during this period. The group thus brings together hardware, infrastructure and software in the same chain.
Investments that weigh on the accounts
Quarterly capital spending reached nearly $10 billion. At the same time, June quarter net profit fell 75% to 10.5 billion yuan. Alibaba therefore faces a gap between the resources committed to AI and the immediate financial results.
Free cash flow also declined, with outflows reaching $6.6 billion. The company has already consumed almost half of its planned three-year investment plan. Despite this pressure, Alibaba believes that the return on investment from its AI projects could occur more quickly. The expected time frame would drop from three years to two and a half years thanks to strong demand.
To support this refocusing, general manager Eddie Wu has initiated sales of assets deemed non-strategic. The group notably sold Lingxi Games to Trustar Capital for an amount estimated at at least $1.6 billion. Alibaba can thus continue its investments in AI without depending solely on its existing activities.
Qwen becomes a central element of the system
This reorganization also supports the progression of the Qwen range, presented as the group’s flagship product. According to a recent report from BE IN CRYPTO, this model range would have become the most popular in the world this year. The group is now seeking to transform this dynamic into sustainable capacity on several levels.
Full-stack logic is not limited to models. It also combines the chips and infrastructure needed to make the systems work. Alibaba thus wants to cover more stages linked to the development and deployment of its technologies. This direction, however, requires high capital, while current expenses are already reducing profits and cash flow.
The new fundraising must support this expansion phase. It comes as the group devotes more resources to AI and reorganizes certain assets. In the short term, Alibaba will mainly need to transform these financial resources into technological capabilities and measurable results.
The evolution of the return on investment will constitute a crucial indicator to follow this trajectory. If the announced deadline is confirmed, the group could accelerate its deployment without prolonging the current financial pressure as much. However, it will have to continue to choose between infrastructure spending, development of models and preservation of its resources. The group will therefore have to demonstrate that this strategy can sustainably support its development in artificial intelligence.
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