Alibaba shares fell sharply in Hong Kong after the company launched a $10.2 billion share sale at a significant discount to fund its expanding artificial intelligence strategy.

The Chinese technology group said it will sell HK$80 billion worth of new shares at HK$112.70 each, representing an 8.4% discount to the previous closing price. The offering will increase Alibaba’s outstanding share count by about 3.6%, raising concerns over dilution.

The proceeds will be used to finance AI chips, infrastructure and model development, as Alibaba shifts more capital toward its Qwen AI ecosystem and cloud computing business.

Despite the selloff, investor demand for the offering was strong, with reported orders totaling around $28 billion. Sovereign wealth funds and long-term institutional investors accounted for a significant portion of demand.

Alibaba Chairman Joe Tsai and CEO Eddie Wu also bought shares following the placement, signaling confidence in the company’s long-term strategy.

The fundraising comes shortly after Alibaba reported a steep decline in quarterly profit, largely due to heavy AI-related spending. Management has argued that these investments could break even within roughly three years as margins improve and proprietary chips reduce reliance on third-party hardware.

The offering is the largest follow-on share sale ever completed by a Hong Kong-listed company and underscores how aggressively global technology companies are raising capital to fund the AI infrastructure race.