Recently, Alibaba announced a major plan: it plans to place new shares to investors outside the United States, with a total amount reaching as high as HKD 80 billion. This is the first time since Alibaba returned to Hong Kong to list in 2019 that it has raised funds through a new share placement.

This massive investment will be invested 100% in the AI field, building full-stack AI capabilities and strengthening AI infrastructure, further consolidating Alibaba's leading position in the global AI sector.

Alibaba spends so lavishly because AI is becoming the core engine driving accelerated company growth. Just a few days ago (August 20), the latest financial report showed that Alibaba's AI-related products have achieved annualized revenue of over 49.5 billion yuan (about 7.3 billion USD), and are expected to reach 10 billion USD next quarter. Alibaba Cloud has set ambitious goals: by 2030, external commercialization revenue is expected to reach $100 billion, with profit margins expected to exceed 20%.

Recognizing Alibaba's tremendous potential as a domestic AI leader, global investors have recently become bullish and raised their target prices.

| 80 billion in placement snatched up: Why are long-term funds optimistic about Alibaba AI?

This HKD 80 billion placement not only quickly saw oversubscription, but also featured high-quality buyers, including high-quality long-term investment institutions such as sovereign wealth funds.

The core reason these big funds are willing to pay so enthusiastically is that Alibaba's AI investment returns are very clear. Against the backdrop of ongoing computing power shortages and rising AI product revenue and gross margins, Alibaba's capital expenditures are expected to be recouped within 2 to 3 years.

Therefore, compared to short-term equity dilution, long-term funds value the certainty of AI growth and the visibility of investment returns.

Just three days before the placement announcement, Alibaba had just released its latest financial report.

As of the quarter ending June this year, Alibaba Cloud's revenue grew 45% year-on-year, with annualized revenue (ARR) of AI-related products reaching 49.5 billion RMB (about $7.3 billion), accounting for 35% of Alibaba Cloud's external commercial revenue. It is worth mentioning that this figure has achieved triple-digit year-on-year growth for 12 consecutive quarters.

Alibaba CEO Wu Yongming stated during the earnings call that Alibaba's AI commercialization has moved from the "crossing the turning point" last quarter to a new stage of "accelerated growth and rising profit margins." Currently, the cloud business profit margin has risen to 12% quarter-on-quarter, and the gross margin of AI-related products is "significantly higher than the average level of cloud products."

Management has set ambitious long-term goals: by 2030, Alibaba Cloud's external commercialization revenue will reach $100 billion, with profit margins likely to exceed 20%.

|Investing in infrastructure first, with more than half of the three-year investment plan already underway

This share placement financing is essentially intended to "replenish ammunition" for Alibaba's already launched large-scale capital expenditure plan.

Alibaba CFO Xu Hong explained very clearly during the call: "Capital expenditure must be invested first to achieve future business growth." "Whether it's AI software subscriptions, large model API inference, or GPU rentals, all commercialization monetization is built on infrastructure such as computing power centers.

As early as February 2025, Alibaba announced a three-year investment plan of 380 billion RMB. As of the end of June 2026, approximately 190 billion yuan had been invested, with overall progress in line with expectations.

Regarding investment returns, Wu Yongming said that AI computing power assets are expected to recoup costs in about three years. With the continuous improvement in AI-related product gross margins, this payback cycle is expected to be further shortened to about 2.5 years, "even roughly two years."

Kingtech's Perspective | It's not "money shortage," but "time rushing"

Many people's first reaction is, "Is Alibaba out of money only after issuing shares?" In fact, Alibaba still holds a net cash position of $46.5 billion on its books, and its balance sheet remains stable.

At this point, choosing equity financing instead of debt financing has three core logics:

First, AI capital expenditure has entered a "heavy assetization" phase, with quarterly capital expenditures reaching 67.678 billion yuan, turning free cash flow negative, making it difficult to sustainably cover with operating cash flow alone.

Second, equity financing does not increase interest-bearing debt, matching the long return cycle of AI infrastructure over three years, making financial logic self-consistent.

Third, the global AI arms race window is extremely narrow. Google raised $84.75 billion, Intel issued $20 billion, and the procurement window for computing power equipment may only last one or two years. If you don't compete, you'll fall behind.

The wave of AI infrastructure orders is far from over

The 80 billion Hong Kong dollars will eventually turn into GPUs, servers, data centers, optical modules, and liquid cooling systems. Alibaba will not produce these devices itself and can only purchase from "water sellers" along the supply chain.

Therefore, what truly deserves attention is not only Alibaba itself but also its underlying computing power supply chain—Industrial Fulian, which supplies AI servers for Alibaba; Zhongji Xuchuang, which supplies optical modules; and Invecn, which supplies liquid cooling systems, are the most certain beneficiaries in this capital war of attrition.

Focus on three major validation nodes

For Alibaba's own investment decisions, it is recommended to closely monitor two core validation indicators:

First, whether AI-related product ARR can surpass $10 billion on schedule next quarter is a signal from management accelerating commercialization; Second, whether cloud business profit margins can continue to climb, to verify whether the high gross margins of AI products can drive overall profitability improvement.

If these indicators continue to materialize, Alibaba is expected to complete the logical shift from "e-commerce valuation" to "AI valuation," and the current valuation level actually offers an opportunity to "trade time for space" layout.