Alibaba sells gaming unit for $1.5B to fuel AI push

Alibaba Group ↗ 0.73% has agreed to sell its gaming subsidiary Lingxi Games to Asian private equity firm Trustar Capital in a deal valued at more than $1.5 billion, according to an internal memo reviewed by The Wall Street Journal News Corp ↘ 1.48% on Monday. The divestiture marks the latest step in the Chinese tech giant's push to shed non-core assets and concentrate resources on artificial intelligence and cloud computing.marketscreener

A Broader Corporate Overhaul

"This is part of Alibaba's overall road map to sharpen its strategic focus," Lingxi Games Chief Executive Zhou Bingshu said in the memo, without disclosing the transaction's size. The sale follows Alibaba's disposal of its stakes in hypermarket chain Sun Art and department-store operator Intime for a combined $2.6 billion in late 2024.marketscreener

Under CEO Eddie Wu, Alibaba has committed RMB 380 billion (roughly $56 billion) over three years to AI and cloud infrastructure, with an ambitious target of generating $100 billion in AI-related revenue within five years. The company this month released its largest-ever AI model, claiming performance on par with Anthropic, and its open-source Qwen model family has surpassed 3 billion cumulative downloads worldwide.tradingview+1

Lingxi's flagship title, Three Kingdoms: Strategy Edition, is a massive multiplayer strategy game developed in partnership with Japan's Koei Tecmo Holdings. The deal mirrors a similar move by ByteDance, which sold its gaming studio Moonton earlier this year as it too increased AI investment.straitstimes+1

Market Reaction

Alibaba shares rose roughly 2.6% to HK$123 in Hong Kong on Monday, supported by the broader Hang Seng Index gaining as much as 1.5%. Analysts maintain a consensus "Strong Buy" rating on the stock with an average 12-month price target of HK$180.95.investing

The gaming sale leaves Alibaba more dependent on the success of its AI and cloud bets at a time when competitors including Tencent and ByteDance continue using content ecosystems to feed their own technology platforms. As Simply Wall St noted, "execution on Alibaba Cloud and Qwen becomes even more important" without gaming as a diversification buffer.finance.yahoo