BABA Stock Falls Despite Wan3.0 Launch: BofA Says $10.2B Raise May ‘Weigh On Sentiment’

• Alibaba shares fell despite the launch of Wan3.0, with investors focused on the impact of its latest capital raise.
• BofA warned the deal could “initially weigh on sentiment” because of dilution, higher AI depreciation and continued capital spending.
• The bank nevertheless called the raise “a mix of growth financing, funding diversification, and pre-emptive balance-sheet strengthening.”

Alibaba (BABA) shares fell in premarket trade on Monday even after the company launched its latest AI video generation model, Wan3.0, with retail traders and Wall Street focused on the cost of the company’s AI ambitions following a $10.2 billion Hong Kong share sale.

Alibaba finalized the placement of 710 million new shares at around HK 112.70 each, raising around HK 80 billion, or about $10.2 billion. The price represented an 8.4% discount to Alibaba’s previous Hong Kong close, and the new shares equal roughly 3.7% of the company’s existing share count. Alibaba said 100% of the net proceeds will go toward expanding its full-stack AI capabilities and infrastructure.

BABA stock dipped over 2% in pre-market trade amid broader market weakness.

Alibaba Raises $10 Billion To Fund AI Push

In a note to investors cited by TheFly, Bank of America (BofA) said Alibaba’s primary placement of 710 million shares in Hong Kong could “initially weigh on sentiment given the immediate dilution, rising depreciation associated with AI infrastructure, uncertainty over the duration of elevated capex and the possibility of further external funding.”

The concerns come after Alibaba’s latest quarterly results showed net profit falling 75% year over year, while the company said it had already spent nearly half of its planned three-year capital expenditure program. Alibaba has committed 380 billion yuan, or about $56.5 billion, to AI infrastructure over three years.

Despite the risks, BofA analyst Justin Post said it the transaction was “a mix of growth financing, funding diversification, and pre-emptive balance-sheet strengthening.” It reiterated a ‘Buy’ rating and $172 price target on Alibaba shares.

Alibaba Pushes Wan3.0 Into AI Video Race

The timing of the financing coincides with Alibaba’s push to expand its AI product lineup. The company officially rolled out Wan3.0 on Monday after launching a public beta on earlier this month. 

The model can generate videos of up to 30 seconds from inputs including documents, spreadsheets, slides and web pages. Alibaba said the model has already been used for short dramas, films, advertising, tourism promotion and music videos.

Wan3.0 puts Alibaba into a crowded field that includes Google’s Veo, ByteDance’s Seedance and Kuaishou’s Kling. Chinese AI companies have become increasingly competitive in generative video, adding another front to the broader U.S.-China AI race.

How Is Retail Feeling About BABA Stock?

BABA was among the top trending tickers on Stocktwits at the time of writing. Retail sentiment around the Chinese e-commerce giant and AI company trended in ‘extremely bullish’ territory over the past day, accompanied by ‘extremely high’ levels of chatter. 

Some traders focused on the capital raise and questioned whether the Hong Kong selling pressure had run its course, while others continued to point to Alibaba’s AI investments as a reason to remain bullish.

BABA stock has fallen over 20% this year and around 1% in the last 12 months.

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