Chinese tech giant Alibaba Group Holding (BABA) is officially closing the deal to sell its gaming unit Lingxi Games to investment firm Trustar Capital. The transaction is valued at $1.5 billion, confirming the company's serious intent to reshape its business around artificial intelligence.
This decision is not just another M&A deal. It is a strategic manifesto of the new course taken by CEO Eddie Wu. Since he took the helm, AI and cloud computing have become not just priorities, but the very foundation of Alibaba's entire corporate philosophy.
Focus on the core: why they are divesting from games
Lingxi's head Zhou Binshu has already notified employees of the business transfer. According to him, this will allow Alibaba to "better concentrate on its strategic priorities." Market observers see this as a logical continuation of Eddie Wu's policy of shedding non-core assets. Earlier, in January 2025, the company already sold its controlling stake in retailer Sun Art Retail Group for $1.6 billion.
Interestingly, Trustar Capital beat out strategic investors from the gaming industry in the race for the asset. The final price of $1.5 billion came in higher than analysts' initial expectations, who had valued the deal at around 9 billion yuan.
The $100 billion goal: betting on AI
The key motive for the sale is obvious. Back in March, Alibaba announced plans to exceed $100 billion in combined revenue from AI and cloud services over the next five years. To achieve this ambitious goal, the company has already reserved 380 billion yuan (about $53 billion) for the next three years.
The pace of development is impressive. This week, Alibaba unveiled its most powerful model, Qwen3.8-Max, which ranked fourth among coding models on the Arena platform, trailing only Claude Opus 5 and Moonshot Kimi K3 versions. This is not just a technological success, but a direct response to the challenge from American AI labs. Chinese models already process more tokens per month than their Western competitors.
The second-quarter financial report will be published on Thursday, August 20. The key question for investors is whether revenue from AI products is growing fast enough to justify such a decisive divestment of other assets.
My take: This is a classic example of "creative destruction" in action. Alibaba is deliberately sacrificing a stable but strategically unimportant business for a race where the winner takes all. Given the scale of investment and the speed at which new models are emerging, the bet on AI looks not just justified, but the only viable path to maintaining its status as a global technology leader. The market is closely watching whether the company can convert its billions into real monetization.