Alibaba is making a major push into artificial intelligence, and it wants investors to fund that effort.
The Chinese e-commerce and cloud giant said Sunday it plans to sell 710 million shares at HK$112.7 each, a move that would bring in roughly HK$80 billion, or $10.2 billion. The offer price sits 3.6% below where its US-traded shares closed on Friday, a small discount meant to entice buyers.
If the placement goes through, it would be Hong Kong's largest follow-on offering on record. It would also be the biggest share sale in the city since 2021, when Prosus NV sold $14.7 billion worth of Tencent Holdings stock.
Not everyone is cheering the move.
Michael Burry, the investor famous for betting against the housing market before the 2008 crash and for being portrayed in "The Big Short," criticized the sale in a Sunday social media post. He said he "cannot bless" the new share issuance and that Alibaba is entering a new phase where its return on invested capital, a measure of how efficiently a company turns investor money into profits, "will continue to fall."
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Burry also said that not too long ago he had planned to move most of his Alibaba position back from JD.com, another Chinese e-commerce player. Now, he says, he no longer wants to. He added that Alibaba's shares would need to drop by half before he would be interested again.
Alibaba's spending spree explains why it needs the cash. The company's quarterly capital spending, money used to build and upgrade things like data centers, is now almost $10 billion. The proceeds from this share sale are meant for what the company calls full-stack AI capabilities, which includes expanding its AI infrastructure and improving its large-language models, the technology behind chatbots and other generative AI tools.
That spending has already taken a toll on the bottom line. In the June quarter, Alibaba's profit fell more than 75% to 10.5 billion yuan, or $1.6 billion. The company also posted a $6.6 billion free-cash outflow, meaning it spent more cash than it brought in, as AI and computing-infrastructure costs climbed.
The financial strain is the price of staying competitive. Alibaba, based in Hangzhou, is China's largest e-commerce company and a leading cloud provider, and it has become a global AI frontrunner this year. Its Qwen model family became the world's most popular, and the company is now one of the biggest AI spenders among Chinese rivals, selling off assets to invest in chips, data centers, and model development.
It has also been shedding assets to keep funding those efforts.
The new shares will be under a 90-day lockup, meaning buyers cannot sell them until that window closes on August 23, 2026. The deal is being arranged by China International Capital Corp., HSBC Holdings Plc, Morgan Stanley, and UBS Group AG.
For everyday investors, this is a story about a company betting its future on AI and asking the market to foot the bill. Alibaba is essentially telling shareholders that the massive spending is necessary to stay in the race, even if it hurts profits in the short term.
Burry's skepticism is a reminder that not everyone thinks that trade-off is worth it. That is a stark warning from someone who has been right before about big market bets.
The real question is whether Alibaba's AI investment will eventually pay off in higher profits, or whether the spending will keep eating into returns. For now, the company is committed to the fight, and it is asking investors to come along for the ride. Whether they want to is their call.
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