Alibaba is raising HK$80 billion ($10.2 billion) through a share placement to accelerate investment in artificial intelligence, giving the Chinese technology giant one of the largest funding war chests for AI infrastructure outside the United States.

The offering, launched Sunday, would be the largest primary follow-on share sale ever by a company listed in Hong Kong and the world’s third-largest primary follow-on offering this year, behind transactions by Alphabet and Intel.

Alibaba said it will use all net proceeds to develop its “full stack” AI capabilities, spanning chips, computing infrastructure, AI models, and their deployment.

The scale of the fundraising indicates that the economics of the AI race are quickly moving from software development toward enormous infrastructure requirements. The priority for Alibaba is building enough computing capacity to meet demand for its AI services while expanding its ability to develop models and the hardware and infrastructure needed to run them.

A term sheet reviewed by Reuters showed Alibaba plans to sell 710 million ordinary shares at HK$112.70 each, representing a 3.6% discount to its latest closing price. The company did not provide a detailed breakdown of how the new capital would be divided among chips, data centers, computing capacity and model development.

The fundraising comes only days after Alibaba disclosed the financial cost of its AI push. The company said last week that it had already spent almost half of its three-year capital expenditure plan. It also said the expected payback period for its AI investments was improving to about 2.5 years from three years, driven by stronger-than-expected demand.

That improvement is central to Alibaba’s decision to accelerate spending.

The company reported a 75% decline in quarterly net profit from a year earlier as it increased capital expenditure related to AI. The deterioration in earnings highlights the immediate financial trade-off facing technology companies investing heavily in the sector: large amounts of cash must be committed today to build computing infrastructure in anticipation of future demand and revenue.

Alibaba CEO Eddie Wu said the investment was necessary to capture that growth.

“In order to be able to capture that future growth, we first need to make these capex investments to build out the necessary compute capacity,” Wu said on an earnings call.

The new share sale gives Alibaba additional funding without relying entirely on operating cash flow or increasing debt to finance its AI expansion. It also provides a significant indication of how investors view the company’s AI strategy. The offering attracted strong demand, including from sovereign wealth funds, according to people familiar with the transaction.

The deal was reportedly oversubscribed, prompting Alibaba to increase its size.

Morgan Stanley, HSBC, UBS and CICC are serving as joint bookrunners, according to people familiar with the offering.

The shares are being sold offshore and are not registered under U.S. securities laws, meaning American investors were not eligible to participate.

Alibaba’s decision to raise such a large amount of capital comes as the global AI infrastructure race enters a period of extraordinary spending.

Since the launch of ChatGPT in late 2022, technology companies have committed enormous sums to data centers, advanced processors, networking equipment and power infrastructure needed to train and operate increasingly sophisticated AI systems.

The spending is intense among the largest U.S. cloud companies. Microsoft, Amazon, Alphabet and Meta are expected to spend roughly $725 billion on capital expenditure in 2026, much of it related to AI data centers, chips and cloud infrastructure.

Alibaba is attempting to build a comparable strategic position in China’s AI ecosystem, although the two markets operate under very different technological and geopolitical constraints.

China’s access to the most advanced AI chips is restricted by U.S. export controls, forcing Chinese technology companies to place greater emphasis on domestic semiconductor development, alternative computing architectures and optimization of AI models to work with available hardware.

That makes Alibaba’s “full stack” strategy particularly significant. Rather than simply purchasing computing capacity from suppliers, the company is investing across several layers of the AI technology stack. Its ambitions include chips and infrastructure as well as the models that ultimately run on that infrastructure.

The strategy could give Alibaba greater control over costs and supply at a time when access to advanced computing hardware has become a strategic issue. It could also allow the company to integrate its AI models more closely with its cloud business. Alibaba Cloud is already one of China’s major cloud-computing providers, giving the company a distribution channel through which it can sell AI computing, models and applications to businesses.

The fundraising therefore has implications beyond Alibaba’s traditional e-commerce operations.

For years, Alibaba was primarily associated with online retail and digital commerce. Its cloud division has become increasingly important, while AI is now emerging as a central pillar of its long-term growth strategy.

The shift is also visible in the company’s capital allocation.

A 75% decline in quarterly profit shows that the AI expansion is placing significant pressure on near-term earnings. Investors are effectively being asked to accept lower profitability today in exchange for a larger position in what Alibaba believes will become a much bigger AI market.

The improving expected payback period provides some justification for that approach. If Alibaba can recover AI infrastructure investments in roughly 2.5 years, the company could potentially reinvest cash flows into additional capacity and create a self-reinforcing expansion cycle.

But that assumption depends heavily on demand continuing to grow.

According to industry analysts, the biggest risk for Alibaba and other AI infrastructure investors is that capital expenditure accelerates faster than monetization. If companies build too much computing capacity before AI applications generate enough revenue, returns on those investments could deteriorate.

The current global spending boom is already raising questions about how quickly AI infrastructure will translate into sustainable earnings. Alibaba’s decision to raise $10.2 billion nonetheless is seen as an indication that the company believes demand is strong enough to justify accelerating rather than slowing its investment.

Warren Buffett appears to remain deeply involved in Berkshire Hathaway’s biggest stock-market decisions, even as Greg Abel takes over as chief executive and assumes responsibility for running the conglomerate’s sprawling operating businesses.

According to CNBC’s Warren Buffett’s Watch, the latest evidence comes from Berkshire’s second-quarter portfolio disclosures, which initially appeared to signal a major shift in how the company was deploying its enormous cash pile.

Two weeks ago, Berkshire reported that its cash reserves had fallen by billions of dollars during the second quarter, marking the first significant decline since early 2022. The move suggested that Abel, who became Berkshire’s CEO, was beginning to put a substantial portion of the company’s capital to work.

But Berkshire’s subsequent disclosure of its equity holdings has complicated that interpretation.

Barron’s Andrew Bary noted that Abel does not appear to have taken over responsibility for Berkshire’s major stock-picking decisions. Instead, Buffett, who is approaching his 96th birthday, still appears to be making some of the most consequential investment decisions involving Berkshire’s more than $350 billion equity portfolio.

The clearest example is Alphabet, the parent company of Google.

Buffett said in a CNBC interview last month that he had “initiated” Berkshire’s investment in Alphabet. The stock first appeared in Berkshire’s portfolio during the third quarter of last year, and the company substantially increased its position during the second quarter.

Berkshire purchased roughly $10 billion of Alphabet shares directly from the company during the quarter, according to Bloomberg News. The transaction followed what Bloomberg described as a “stealthy weekend call” from Goldman Sachs, which was arranging Alphabet’s large equity offering.

Abel reportedly gave a “rapid signoff” to the transaction, although Buffett presumably also approved the investment.

The episode illustrates the evolving division of responsibilities at Berkshire. Abel has formal authority as CEO and is responsible for managing the conglomerate’s operating businesses, but Buffett’s investment judgment remains a major part of Berkshire’s identity and capital-allocation strategy.

Buffett has also been careful to emphasize that the two men communicate regularly. He has said he and Abel would not make major decisions that the other did not approve.

This matters because Berkshire’s equity portfolio is one of the world’s largest pools of corporate capital. Decisions involving even a small percentage of that portfolio can translate into billions of dollars of stock purchases or sales.

The second-largest equity purchase during the second quarter, Delta Air Lines, appears more likely to have come from portfolio manager Ted Weschler, according to Bary.

Abel has no formal background as a portfolio manager and does not appear to have made notable stock-picking decisions since becoming CEO. His responsibilities instead include overseeing Berkshire’s numerous operating businesses and identifying potential acquisitions.

He has nevertheless begun deploying Berkshire’s cash through acquisitions. His $6.8 billion purchase of Taylor Morrison Home is one example, although the transaction did not close until after the second quarter ended.

The distinction between Berkshire’s public-equity investments and its operating-company acquisitions could become more important as Abel establishes his own capital-allocation record.

Buffett built Berkshire’s reputation around the ability to deploy large amounts of capital into businesses and securities when valuations and market conditions were attractive. Abel will now have to demonstrate that he can preserve that discipline while operating a company with an enormous balance sheet and hundreds of billions of dollars in investable assets.

Alphabet’s rise within Berkshire’s portfolio provides another illustration of how quickly the company’s investment rankings can change. Berkshire increased its Alphabet position by roughly $17 billion during the second quarter, making the technology company its third-largest equity holding as of June 30 and pushing Coca-Cola into fourth place.

At the end of the quarter, Berkshire’s Alphabet holdings were worth $37.77 billion, compared with $32.51 billion for Coca-Cola, giving Alphabet a $5.26 billion lead.

The gap has since almost disappeared.

Alphabet shares have fallen about 3.5% since June 30, while Coca-Cola has gained 12.1%. Based on Friday’s closing prices, Alphabet’s lead over Coca-Cola was only about $20 million.

Coca-Cola briefly overtook Alphabet at the close on July 30 and again on Aug. 20, demonstrating how closely the two positions are now matched.

The changes underline how Berkshire’s portfolio can shift in ranking even without Buffett or his investment managers buying or selling another share. Market movements alone can alter the relative size of its largest holdings by billions of dollars.

Berkshire is also dealing with a separate legal issue involving its HomeServices of America real estate subsidiary. A federal appeals court in St. Louis has upheld a 2024 settlement involving HomeServices and the National Association of Realtors in a class-action antitrust case over real estate commissions.

HomeServices agreed to pay $250 million as part of a settlement exceeding $1 billion. The agreement also required the National Association of Realtors to change rules governing the division of real estate commissions.

The underlying case followed a 2023 jury verdict that found the defendants liable for $1.78 billion in damages. Under U.S. antitrust law, that amount could have been tripled. Some plaintiffs objected to the settlement, arguing that they were receiving insufficient compensation, and sought to block the agreement.

The 8th U.S. Circuit Court of Appeals this week upheld a lower court’s approval of the settlement.

A lawyer representing some of the objectors told Reuters they could seek review by the Supreme Court.

“Everyone got next to nothing for the sake of settling. There’s something just not right about that,” the lawyer said.

HomeServices CEO Chris Kelly said the appeals court decision provides “additional certainty” for the company, its agents and customers.

The ruling does not resolve all of Berkshire’s exposure to litigation involving real estate commissions. Berkshire Hathaway Energy, which owns HomeServices, remains the target of a separate proposed antitrust class action after a judge ruled in April that the company was not covered by the HomeServices settlement.

The separate case follows the antitrust litigation against the National Association of Realtors and major brokerage companies.

A lawyer for plaintiffs targeting Berkshire Hathaway Energy previously described Berkshire as the “leader of the pack” and argued that targeting the conglomerate could put pressure on corporate America to change its practices.

For Berkshire, the investment and legal developments highlight two different challenges facing the company as Buffett’s era gives way to Abel’s leadership.

Abel has inherited responsibility for an enormous operating conglomerate and is beginning to make major acquisitions, but Buffett’s fingerprints remain visible on some of Berkshire’s largest stock investments.

That transition is likely to remain closely watched because Berkshire’s investment portfolio is not simply a source of returns. It is a central component of the company’s capital-allocation strategy, and the decisions made over the next several years will help determine how effectively Abel can establish his own record while maintaining the investment discipline that defined Buffett’s tenure.