Alibaba leads Chinese tech funding spree with US$3.2 billion deal

[NEW YORK] Alibaba Group Holding is leading a fundraising spree among Chinese tech giants, driven by soaring capital demands amid intensifying competition in artificial intelligence.

The company is seeking to raise US$3.17 billion in an offering of zero-coupon convertible notes that is set to be the year’s biggest. The Chinese e-commerce company’s notes due 2032 will convert into its American depositary receipts, according to terms of the deal seen by Bloomberg News.

Investors have expressed interest for multiple times the deal size, and the company stopped taking orders from Asia investors at one pm Hong Kong time, according to people familiar with the matter.

The huge appetite for cash among Chinese tech giants is a sign of the bruising competition in the sector, where companies are piling billions of US dollars into cloud computing, AI, and even food delivery.

Earlier this week, another Chinese tech giant Baidu raised 4.4 billion yuan (S$793.3 million) from a dim sum bond offering, following a 10 billion yuan issuance in March. Tencent Holdings is considering its first public debt offering in four years with a sale of offshore yuan bonds as early as this month. Meituan is also exploring a potential dim sum bond offering.

The proceeds from Alibaba’s convertible bonds will be spent on various purposes, including scaling up its data centres, upgrading technology and expanding international commerce operations, the terms show.

The Hangzhou-based company said earlier this year it will spend US$53 billion over three years on AI infrastructure such as data centres in an ambitious bid to become a leader in artificial intelligence.

Alibaba did not immediately respond to a request for comment.

“Alibaba is playing a long game – raising cheap capital, hedging dilution, and doubling down on growth,” said Ravi Wong, first vice-president at Yan Yun Family Office (HK). “It’s worth watching how these investments translate into revenue acceleration.”

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The company is in fierce competition for Chinese consumers, pitting it against rivals including Meituan and JD.com Earlier this week, Alibaba committed another one billion yuan of incentives to drive more traffic to one of its most popular online services.

The sector’s capital-raising moves also underscore the already white-hot global AI race that is further intensifying. Nvidia’s chip production partner Taiwan Semiconductor Manufacturing Co reported healthy sales growth in August earlier this week, while Oracle provided an aggressive outlook for its cloud business. Last week, Broadcom’s stock also soared after news emerged that it secured a massive order with OpenAI totalling more than US$10 billion.

“Optimism that rising AI demand will lead to meaningful earnings upside at China’s cloud computing companies remains misplaced,” Robert Lea, an analyst at Bloomberg Intelligence, said. “We consequently expect the price war and surging energy costs to keep China’s fragmented cloud sector in the red for the next three years.”

Asian sales of bonds that can turn into shares have soared in 2025 and are heading towards multiyear highs. The instrument offers a cheaper way to raise cash than traditional debt, especially as interest rates are elevated and rallying stocks create the right conditions for this corner of the market to thrive.

China Pacific Insurance (Group), is also tapping the convertible bond market by raising HK$15.6 billion (S$2.6 billion) from the instrument.

Alibaba raised US$5 billion in convertible bonds last year, a record US dollar-denominated issue by an Asian company at the time. In July, it raised HK$12 billion from the sale of bonds exchangeable into shares of a unit, Alibaba Health Information Technology.

The conversion premium for Alibaba’s latest notes was adjusted to the 30 per cent to 32.5 per cent range, from 27.5 to 32.5 per cent previously, the people familiar with the matter said. There is a lock-up on the issuer for 90 days from the pricing date.

Alibaba shares rose as much as 2.6 per cent to HK$146.50 on Thursday in Hong Kong after its ADRs fell in the US. The stock has climbed more than 70 per cent this year.

The fundraising boom is also becoming a bonanza for investment bankers.

Barclays, Citigroup, HSBC Holdings, JPMorgan Chase, Morgan Stanley and UBS Group are working on the latest Alibaba offering. BNP Paribas, Deutsche Bank and Mizuho Securities are also helping, according to terms of the deal seen by Bloomberg. BLOOMBERG