Alibaba shares plunged as much as 10% in Hong Kong on Monday after the Chinese tech giant priced an 80 billion Hong Kong dollar ($10.20 billion) placement of newly issued shares to non-U.S. investors.
The company said it plans to use all of the net proceeds to invest in its full-stack AI capabilities, including expanding and enhancing its AI infrastructure.
Alibaba will issue 710 million new shares at HK$112.70 apiece, compared with the stock's Friday closing price of HK$123. Shares were last trading 8.4% lower at HK$112.7. The placement is expected to close on Wednesday.
The move comes just days after Alibaba reported a 75% drop in profit for the June-quarter as heavy AI spending weighed on its results. Capital expenditure jumped 75% to 67.7 billion yuan. Alibaba's U.S.-listed shares fell 3.4% in premarket trading.
Vey-Sern Ling, senior equity advisor at UBP, told CNBC last week following Alibaba's latest earnings that the company was well-positioned to pursue AI growth. "I think Alibaba clearly is well positioned to chase that growth, given that they have a cloud computing arm, they have a very strong AI model," he said, adding that profits might weaken in the near term, while capex might rise.