Equity is doing the heavy lifting
Chinese tech names are leaning on follow-on offerings to bankroll AI buildouts, pulling in more than $41 billion so far this year. At this clip, it would be the strongest showing since at least 2020. The headline deal: Alibaba's $10 billion share sale last month, the largest of its kind in Hong Kong, pulled together over a single weekend. The broader group spans BICS categories like e‑commerce, semiconductors, communications gear, internet media and services plus electronic components, along with related industries. Other issuers include Z. AI Co., MiniMax Group Inc., and Shanghai Biren Technology Co.
Debt is available, but it is not the go-to
Borrowing has played a smaller role. This year, the same set of listed Chinese tech firms sold about $15 billion of bonds - a six-year high, but still a fraction of their equity haul. In contrast, their US counterparts secured $103 billion via follow-on equity offerings and around $380 billion in debt.
Several frictions help explain the gap: many Chinese tech borrowers have a relatively limited investor base and have predominantly sold bonds offshore, dollar borrowing costs are elevated, and issuing debt globally can be pricier for them. Put simply, Chinese management teams have emphasized balance-sheet strength and cash reserves, while "US firms optimize for capital efficiency, often using debt to boost return on equity," as Jian Shi Cortesi at Gam Investment Management put it.
The market reaction: dilution fears and uneven performance
Alibaba's surprise raise amplified sector-wide dilution worries. Its Hong Kong shares are down more than 10% since the deal, and purchases of stock by co‑founder Jack Ma and other top executives haven't reversed the slide. Forward earnings estimates for Alibaba have slipped about 4% from a mid‑August high.
Benchmark moves tell the story: in Hong Kong, the Hang Seng Tech Index - home to names like Alibaba and MiniMax - is down 20% this year. The onshore STAR 50 is up 18%, but still 28% below its late‑June peak. For context, the Philadelphia Stock Exchange Semiconductor Index has surged 68% in 2026.
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On spending, Jefferies estimates Chinese cloud providers' capex ran at 25% of sales in the second quarter, versus 33% for US peers. About one-third of the major tech constituents in Hong Kong and on the mainland are expected to post negative free cash flow over the coming 12 months. That list includes internet heavyweights from Alibaba to Baidu Inc., and AI hardware names like Range Intelligent Computing Technology Group Co. and Victory Giant Technology Huizhou Co. Softer cash generation, in turn, makes additional follow-on equity raises more likely from here.
What pros are watching next
At Bold Wealth Partners, chief investment officer Jason Lemire said, "This is definitely a trend that should continue," pointing to aggressive AI capex plans and earlier rallies that can make issuing stock attractive. He added that "offshore (debt) financing rates are much more expensive." Lemire flagged STAR board chipmakers as likely candidates for equity raises and said to watch Hong Kong‑listed giants that may need larger budgets, including Tencent, Xiaomi, and Meituan. According to BNP Paribas's Jason Lui, who heads Asia‑Pacific equity and derivatives strategy, there is a well established "supply demand playbook" for equity that investors know, with fewer parallels in fixed income.
And with many Chinese tech firms having a relatively limited investor base offshore and higher dollar borrowing costs, the path of least resistance still looks like equity. As Shanghai Chengzhou Investment Management's Xiang Xiaotian put it, "The market is underpricing dilution risk.
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