The stock of Alibaba (BABA) is down 10% after the Chinese technology giant announced plans to sell more shares in order to fund its artificial intelligence (A.I.) investments.
The company priced a $10.20 billion U.S. placement of newly issued shares to non-U.S. investors.
Alibaba said that it plans to use the proceeds to invest in its A.I. capabilities, including expanding and enhancing it’s A.I. infrastructure.
Share sales are typically frowned upon by investors and analysts as they dilute existing stockholders.
Nevertheless, Alibaba said it plans to issue 710 million new shares as it looks to fund it’s A.I. ambitions.
The share placement, which is expected to close on Aug. 26, comes just days after Alibaba reported a 75% drop in profit for the year’s second quarter.
Management at the company said the financial results were hurt by heavy A.I. spending. Alibaba’s capital expenditures rose 75% year-over-year in the spring quarter.
The e-commerce company, which is often called the “Amazon (AMZN) of China,” is counting on A.I. to drive future growth.
Alibaba last year announced plans to invest at least $56 billion U.S. in its cloud computing and A.I. infrastructure over the next three years.
Prior to Aug. 24, BABA stock had declined 23% this year to trade at $119.34 U.S. per share in New York.
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