On August 24th, Chinese e-commerce platform Alibaba announced the pricing of its 8 billion Hong Kong dollars (approximately 10.2 billion US dollars) new stock placement. Following the announcement, Alibaba’s Hong Kong stock price plummeted by over 10% at one point during trading, eventually closing down by 9.02% and falling below the placement price. This massive placement has raised concerns in the market about share dilution and the return on investment in artificial intelligence (AI), intensifying investors’ worries about other tech giants potentially following suit in fundraising, leading to collective pressure on tech stocks and weakening the Hong Kong stock market.
In the morning of August 24th, Alibaba disclosed on the Hong Kong Stock Exchange that it would issue 710 million new shares at 112.70 Hong Kong dollars per share, totaling nearly 8 billion Hong Kong dollars, with the completion expected on August 26th. The net proceeds from this placement will be entirely used for investing in end-to-end artificial intelligence (AI) capabilities, including expanding and enhancing AI infrastructure.
After the announcement, Alibaba’s stock price tumbled, dropping over 10% intraday, ultimately closing at 111.90 Hong Kong dollars, a decrease of 9.02%, falling below the placement price of 112.70 Hong Kong dollars.
The sudden large-scale fundraising through new shares by Alibaba has triggered concerns in the market. Some analysts believe that other tech companies may follow Alibaba’s lead in issuing discounted shares for fundraising, consequently exerting pressure on the valuation and stock prices of tech stocks. On the same day, tech stocks experienced a broad decline with Tencent falling by 3.72% to 440 Hong Kong dollars, Baidu Group dropping by 3.75% to 89.7 Hong Kong dollars, AI stock Zhipu plummeting by 10.8% to 1007 Hong Kong dollars, and MiniMax plunging by 10.08% to 312.2 Hong Kong dollars.
The fundraising news from Alibaba also dragged down the Hong Kong stock market. At the close of August 24th, the Hang Seng Index dropped by 1.89% to 25,517.33 points, the Hang Seng Tech Index fell by 3.61% to 4594.04 points, the H-share Index decreased by 1.89% to 8471.36 points, and the Red-chip Index declined by 1.04% to 4247.63 points.
According to a report by the Financial Times, this marks the first time Alibaba has initiated a new stock placement since its listing in Hong Kong in 2019. The unusual fundraising move reflects the pressure that major tech companies are beginning to feel from the capital drain caused by the AI “money-eater”.
Looking at Alibaba’s latest financial report, the company still holds relatively ample cash reserves. As of the quarter ending on June 30th, the net cash flow generated from operating activities by Alibaba was 22.9 billion Chinese yuan, an 11% year-on-year increase. The total amount of cash, cash equivalents, short-term investments, equity securities in the consolidated balance sheet, and other unrestricted financial investments reached 474.5 billion yuan.
However, it is noteworthy that the speed at which the company’s core business generates profits is far behind the pace at which AI spends money. In that quarter, Alibaba’s free cash flow was a net outflow of 44.7 billion yuan (compared to a net outflow of 18.8 billion yuan in the same period in 2025). The decrease in free cash flow is primarily attributed to increased spending on cloud infrastructure. In comparison, during the same period, Alibaba’s capital expenditures reached 67.7 billion yuan, a 75% year-on-year increase, approaching three times the operating cash flow for the same period.
The report mentioned that as the AI competition shifts from models to computing power, reasoning, and applications, major tech companies are collectively entering a peak period of high capital expenditure.
Tencent’s latest financial report also shows a significant increase in capital expenditure, with Tencent’s capital expenditure reaching 52.784 billion yuan in that quarter, a 176% year-on-year increase and a 65% increase compared to the previous quarter, with a free cash flow of a net outflow of 13.8 billion yuan. Although Tencent still maintains a healthy cash position, the AI “money-eater” is evidently raising concerns about cash flow for major tech companies. By the end of June, Tencent’s net cash was 58.2 billion yuan, a 60% decrease compared to the end of March.