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Alibaba Group Holding Limited (NYSE:BABA)'s race to amass vast sums of money to support its AI push led it to a recent $10.2 billion equity raise, drawing scrutiny from investors. The company issued 710 million shares at a discount price.
On September 7, Bernstein SocGen lowered its price target on Alibaba to $165 from $180 but maintained an Outperform rating on the stock. Bernstein highlighted concerns about the timing and optics of the capital raise.
For investors, the central question is whether Alibaba's AI investments can generate returns quickly enough to offset the dilution.
Alibaba Group Holding Limited (NYSE:BABA)'s equity raise has drawn scrutiny because the company already had more than $30 billion in net cash. That massive cash stockpile is evidence that the company was not dependent on new capital to shore up its balance sheet. Rather, the proceeds from the latest equity raise are intended to support Alibaba's AI investment strategy, which is becoming more expensive yet urgent.