How borrowing kept Joe Tsai Invested In Alibaba's AI push

On 25 August, two days after Alibaba launched a heavily discounted HK$80 billion share sale to pay for its artificial intelligence build-out, Joe Tsai bought another 720,000 of its Hong Kong shares at an average of HK$113.47 each. The purchase came to about HK$82 million. The sum was small next to the fundraising. It added to a stake Tsai has kept for more than a decade, which now gives him direct exposure to Alibaba's expansion in AI.

Revenue from Alibaba's AI cloud and computing business rose 45% to RMB48.4 billion in the June quarter, and the company is spending heavily to keep that growth going. Tsai still holds a large stake in that business because of how he has paid for his ventures outside it. When he has needed cash, he has generally borrowed against his Alibaba shares rather than sold them.

Borrowing against the stake

The approach was visible within a year of Alibaba's 2014 New York listing. In September 2015, as the post-IPO lock-up on their shares was about to expire, Tsai and co-founder Jack Ma were reported to be seeking a $2 billion loan against their Alibaba holdings. The money could be used to fund Blue Pool Capital, the Hong Kong family office Tsai had set up to manage the wealth the listing created. The pattern of financing against Alibaba stock to fund new ventures has run through his career since.

Tsai's biggest outside purchase was the Brooklyn Nets. He bought 49% of the team in 2018 with an option on the rest. He exercised it in August 2019 in a deal reported at about $2.35 billion for the team, then a record for a US franchise, with nearly $1 billion more paid for the Barclays Center in a separate transaction. The WNBA's New York Liberty followed. In 2024 members of the Koch family bought 15% of BSE Global, the holding company for the Nets, the Liberty and the arena, in a deal valuing it at about $6 billion. Blue Pool, meanwhile, has raised $1.4 billion for a private equity fund.

Tsai has sold some Alibaba stock: in December 2022 he arranged to sell about 3 million American depositary receipts, roughly 8% of his holding and worth about $260 million, after earlier sales for wealth planning and philanthropy. Most of the stake was kept.

Raising cash against an existing shareholding is a standard tool for founders whose wealth sits in one company. It can enable the holder to fund something new while keeping economic exposure to the original business.

The AI position

Tsai's holding of about 275 million Alibaba shares was worth roughly $3.7 billion at the end of September, according to MarketScreener. He became chairman in 2023, and his family office bought nearly 2 million Alibaba depositary shares worth $152 million in the final quarter of that year.

In the June quarter, revenue from Alibaba's AI-related products grew at a triple-digit rate for the twelfth quarter in a row. Alibaba's Qwen family of models had passed 700 million downloads on the Hugging Face platform by January. Nearly 400 Qwen models have been released openly, and more than 180,000 derivative versions have been built on them by other developers.

Tsai has argued publicly for that open approach. He has credited open-source models and cheap power for China's progress in AI, and in October he said open source is Europe's best chance to compete. Some European companies have already chosen Chinese open models over local ones. Free models earn nothing on their own. Alibaba's revenue comes from the cloud capacity and services that customers pay for to run them.

Who pays for it?

Capital spending rose 75% to RMB67.7 billion in the June quarter. Alibaba attributed most of the increase to AI infrastructure, along with procurement timing and higher chip prices. The August share sale, priced at a discount, helps fund that spending.

Smaller Chinese AI companies produce models close to the US frontier, yet raise a fraction of the venture capital that goes to their American rivals. Alibaba can pay for computing power from its own cash flow and from the equity market. Much of China's AI development therefore rests with a few large companies that can pay for it, and Alibaba is one of them.

The returns on Alibaba's investment will be measured in its cloud revenue over the next several quarters. If growth holds near 45%, the holding Tsai kept may come to be worth more than the sports assets his borrowing paid for. He will see the outcome as chairman and a major shareholder, because in 2015 he borrowed against his shares instead of selling them.

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