Alibaba Faces Scrutiny Over $10.2 Billion Raise

Alibaba raised $10.2 billion through an equity offering of 710 million shares at a discount price to fund its artificial intelligence push. The capital raise drew scrutiny from investors because the company already held more than $30 billion in net cash. Recent company results also revealed earnings pressure as AI expenditures accelerate.

On September 7, Bernstein SocGen lowered its price target on Alibaba to $165 from $180, while maintaining an Outperform rating. The firm noted concerns regarding the timing and optics of the raise. According to Bernstein's datacenter model, the Zhenwu 810E chip has an estimated 3-year payback period on capital expenditures. Channel feedback on the newer M890 chip, which entered commercial deployment in August, indicated a 2.5-year payback period.

Hedge fund ownership in Alibaba tracked by Insider Monkey fell to 97 funds in the second quarter from 102 in the first quarter. Fisher Asset Management trimmed its position by 1% to 5.1 million shares after a 5% cut in the prior quarter. Conversely, Discerene Group increased its stake by 4% to 2.7 million shares, and Citadel Investment Group boosted its holdings by 39% to 2 million shares. As of August 14, short interest stood at roughly 42 million shares, representing 2% of the public float and an increase of 0.34% from the previous report.