$10 Billion to Accelerate AI: Alibaba Embraces a “Full-Stack” Strategy

Artificial intelligence is rapidly changing the priorities of major technology groups. In China, Alibaba is preparing a new step with a $10 billion fundraising round. This operation now takes place as technology investments are sharply reducing profits and cash flows. The group is therefore looking for new ways to support its expansion while accelerating its technological capabilities.

Alibaba accelerates its AI offensive

Alibaba is offering 710 million ordinary shares at a price of HK$112.70 per share, according to a Bloomberg report. This amount represents a 3.6% discount compared to the closing price on Friday. 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 needed to develop a comprehensive AI strategy.

Worldwide, this operation ranks third among the largest transactions cited this year. Only Alphabet’s $80 billion fundraising in June and Intel’s $15 billion sale in August surpass it. This approach covers chips and infrastructure as well as the development and deployment of AI models.

This mechanism frames the availability of the relevant shares during this period. The group thus brings together hardware, infrastructure, and software in a single chain.

Investments weighing on the accounts

Quarterly capital expenditures reached nearly $10 billion. At the same time, the net profit for the June quarter fell by 75% to 10.5 billion yuan. Alibaba is therefore facing a gap between the resources committed to AI and immediate financial results.

Free cash flows also decreased, with outflows reaching $6.6 billion. The company has already consumed nearly half of its planned three-year investment plan. Despite this pressure, Alibaba believes that the return on investment for its AI projects could happen faster. The expected time frame would go from three years to two and a half years thanks to strong demand.

To support this refocus, CEO Eddie Wu has initiated disposals of assets deemed non-strategic. The group notably sold Lingxi Games to Trustar Capital for an estimated amount of at least $1.6 billion. This reorganization also accompanies the progress of the Qwen range, presented as the group’s flagship product.

Qwen becomes a central element of the system

This reorganization also accompanies the progress of the Qwen range, presented as the group’s flagship product. According to a recent BE IN CRYPTO report, this range of models has become the most popular in the world this year. The group is now seeking to transform this momentum into sustainable capacity on multiple levels.

The “full-stack” logic extends beyond models. It also combines the chips and infrastructure necessary for the operation of systems. Alibaba thus wants to cover more steps related to the development and deployment of its technologies. This orientation, however, requires high capital, while current expenses already reduce profits and cash flows.

The new fundraising should support this expansion phase. It comes as the group dedicates more resources to AI and reorganizes some assets. In the short term, Alibaba will especially have to transform these financial resources into technological capabilities and measurable results.

The evolution of the return on investment will be a crucial indicator for tracking this trajectory. If the announced time frame is confirmed, the group could accelerate its deployment without extending the current financial pressure as much. However, it will have to continue to balance infrastructure expenses, model development, and preservation of its resources. The group will therefore have to demonstrate that this strategy can sustainably support its development in artificial intelligence.