Alibaba shares tumble as investors question AI spending splurge

Alibaba just raised $10.2 billion to pour into artificial intelligence. The market’s response was to knock nearly 10% off the company’s stock price. Shares of Alibaba Group listed in Hong Kong plunged to approximately HK$111-112.10 after the company announced a record HK$80 billion primary share placement, the largest fundraising move in the company’s history. The 710 million new shares were priced at HK$112.70, an 8.4% discount to the prevailing market price. The numbers behind the nerves The share placement didn’t arrive in a vacuum. It landed just days after Alibaba reported June-quarter earnings that left investors doing a double-take. Revenue climbed 9% to RMB268.95 billion. But net profit cratered 75% year-over-year to RMB10.5 billion, roughly $1.6 billion. The culprit: capital expenditures surged 75% to RMB67.68 billion, or about $10 billion, almost entirely driven by AI infrastructure buildout. The company reported negative free cash flow of negative $6.6 billion for the quarter. US-listed ADRs had already dropped over 8% on August 22 following the earnings release. The Hong Kong share placement announcement a couple of days later added fresh selling pressure. The AI ambiti...