Chinese tech companies raise more than $41 billion in new stock offerings, as demand for AI spending drives fundraising surge

So far this year, Chinese listed technology companies have raised more than US$41 billion through the issuance of new shares. The picture shows the Alibaba logo.

To support spending on artificial intelligence (AI), China's listed technology companies have raised more than US$41 billion (NT$1.3 trillion) through new stock offerings so far this year, exacerbating investor concerns about profit dilution and oversupply in an already underperforming market.

According to data compiled by Bloomberg, China's listed technology companies have raised more than US$41 billion through the issuance of new shares so far this year, the most since 2020. Among them, Alibaba Group launched a US$10 billion (NT$315.48 billion) new share placement at the end of August, leading this wave of fundraising. Other participating companies include Z. AI, MiniMax and Shanghai Biren Technology.

Alibaba's swift move has fueled market expectations that other Chinese peers may make similar moves, as the battle for AI dominance heats up, both in China and with the United States. In addition, Chinese companies prefer to use the stock market for financing, which is very different from the practice of American companies that rely more on debt financing. The comparison not only highlights the importance Chinese companies place on maintaining healthier balance sheets, but also reflects the higher costs they face when issuing debt globally.

Jason Lemire, chief investment officer at Bold Wealth Partners, said: "This is definitely a trend that should continue. Chinese AI companies are advancing aggressive capital expenditure plans, and the previous stock market rally may also encourage these companies to issue more shares. In comparison, the cost of overseas debt financing is much higher."

The craze for China's AI-related companies to issue new shares to raise funds is an important reason for the poor performance of the country's two major technology indexes in recent months. Hong Kong's Hang Seng Technology Index, whose constituent stocks include AI giants such as Alibaba and Xiyu Technology, has fallen 20% this year. Although the Shanghai Science and Technology Innovation 50 Index has risen 18% this year, it has fallen sharply by 28% compared with its high point in late June. In comparison, the Philadelphia Semiconductor Index in the United States has soared 68% this year.

Investors' concerns about profit dilution caused by the issuance of new shares by Chinese companies were fully exposed after Alibaba launched a new share placement at the end of August. Alibaba's Hong Kong-listed shares have fallen more than 10% since the launch of the above-mentioned fundraising operation, and even though co-founder Jack Ma and senior executives bought back the shares, they have been unable to reverse the selling pressure.