Alibaba launches Wan3.0 as $10bn AI share sale hits stock

Alibaba launched its Wan3.0 AI video-generation model on Monday, August 24, as the Chinese technology group began a $10.2 billion share placement to finance expanding AI investment, sending its Hong Kong-listed shares as much as 10.5 per cent lower.

The new model can generate videos of up to 30 seconds from documents, spreadsheets, presentations and web pages, according to Alibaba Cloud. The company said Wan3.0 had already been used in film and short-drama production, advertising, tourism promotion and music videos during a public beta that began on August 6.

Reuters reported that Alibaba is selling 710 million new shares at HK$112.70 each, an 8.4 per cent discount to Friday’s closing price. The placement, equivalent to 3.6 per cent of the enlarged share count, is expected to raise HK$80 billion and is the largest follow-on share offering by a Hong Kong-listed company.

Alibaba said the proceeds will be used to expand its full-stack AI capabilities, including AI infrastructure, models and chips. The fundraising comes after the company reported a 75 per cent year-on-year fall in quarterly profit last week, while capital expenditure rose 75 per cent to 67.7 billion yuan as spending on AI and computing infrastructure increased.

The share sale attracted orders worth about $28 billion, including demand from long-only and sovereign investors, according to people familiar with the matter cited by Reuters. The order book included investors such as Qatar Investment Authority, Norway’s Norges wealth fund and Hillhouse, according to one source.

Vey-Sern Ling, senior equity adviser at UBP, told CNBC that Alibaba was “well positioned to chase” AI growth because of its cloud computing business and AI models. He said profits could weaken in the near term while capital expenditure rises as the company increases its AI spending.

Alibaba has committed 380 billion yuan to cloud computing and AI infrastructure over three years, with the company saying at its latest earnings that almost half of that plan had already been committed. Chief executive Eddie Wu said AI computing investments were expected to break even within three years, potentially within two and a half years, as margins improve and proprietary chips replace third-party hardware.

Yang Tingwu, vice general manager of Tongheng Investment, told Reuters that Alibaba’s “DNA is in e-commerce, not advanced tech”. He argued that greater investment in AI hardware could leave the company struggling to match competitors on technology innovation.

The company has separated its AI operations from its cloud business this year, while developing AI agents across its shopping, food delivery, travel and entertainment services. Its Qwen models have become widely used in China as Alibaba seeks to make AI a larger source of growth while its traditional e-commerce business faces slower expansion.