To The Moon

This morning, $Alibaba(BABA)$'s stock price plunged over 10% at one point, nearing the HK$110 level, which dragged the Hang Seng Tech Index down by 2.5%.

On the news front, Alibaba Group raised approximately HK$80 billion (US$10.2 billion) through the largest stock placement in Hong Kong market history, underscoring the company's determination to raise and deploy substantial funds in its bid for global AI leadership.

The giant, which has pivoted from online retail to the AI arena, placed 710 million new shares at HK$112.7 each, an 8.4% discount to last Friday's closing price in Hong Kong. In terms of dilution, based on public data estimating Alibaba's total outstanding Hong Kong shares at about 20.4 billion, the newly issued 710 million shares represent approximately 3.48% of the existing share capital, resulting in a dilution of about 3.36% for existing shareholders, with earnings per share and net assets per share diluted by the same proportion.

Currently, Alibaba has US$54.3 billion in cash reserves on its books, yet it still chose to raise funds through a placement. Such a cash‑rich giant, instead of paying dividends or executing share buybacks, is tapping the market for a huge amount of capital, effectively sucking a significant portion of liquidity out of the already strained Hong Kong market.

This financing reflects Alibaba's ambition to outspend its Chinese rivals in AI and close the gap with its U.S. peers. The company has sold some assets and pledged to invest over RMB 380 billion over three years in AI areas including chips, data centers, and large language model development.

On the views of prominent investors, "Big Short" investor Michael Burry said he "cannot endorse" Alibaba's placement, adding that "this is yet another new paradigm for Alibaba, and its return on invested capital (ROIC) will continue to decline." He also stated, "I won't be interested unless Alibaba's stock price halves." Currently, Alibaba's e‑commerce segment has just stopped its profit decline, and its flash sale business has narrowed by 40% quarter‑on‑quarter, stabilizing its core business. Now, the company is squeezing massive capital into AI development. Although Alibaba's cloud computing division has achieved double‑digit percentage growth and AI‑related revenue once grew at triple‑digit rates, Alibaba has yet to prove that its AI services can generate sustainable long‑term revenue. Moreover, at a time when Chinese consumer confidence is weak and competition in China's AI market is intensifying, how will Alibaba's capital expenditure be monetized in the future.$BABA-W(09988)$