Chinese tech giant Alibaba Group Holding (BABA) is finalizing a deal to sell its gaming unit Lingxi Games to Asian investment firm Trustar Capital. The transaction is valued at $1.5 billion, significantly exceeding initial market expectations.
This move is not just a financial operation but a clear signal of shifting priorities. Under CEO Eddie Wu, the company is making a decisive bet on artificial intelligence and cloud computing, shedding assets unrelated to its core business.
Reasons for selling the gaming business
Lingxi head Zhou Binshu has already informed employees that transferring the business to Trustar will allow Alibaba to concentrate resources on strategically important areas. "Alibaba is handing Lingxi to Trustar to better focus on its strategic priorities," Zhou stated.
Notably, this is not the first divestment of non-core assets. In January 2025, Alibaba sold a controlling stake in retail chain Sun Art Retail Group to DCP Capital for approximately $1.6 billion. Clearly, management is consistently executing a strategy of "pure focus" on high-margin and fast-growing segments.
Trustar Capital outbid strategic investors from the gaming industry and became the favorite in this deal. The final amount of $1.5 billion exceeded analyst forecasts, which had previously set a benchmark of around 9 billion yuan.
The $100 billion AI goal as the main motive
The key driver of this deal is Alibaba's ambitious goal to exceed $100 billion in combined revenue from AI and cloud services over the next five years. The company has already allocated 380 billion yuan (about $53 billion) to these areas over three years.
The pace of development is impressive. This month, Alibaba unveiled its largest model, Qwen3.8-Max, which ranked fourth on the Arena platform among coding models, right behind versions of Claude Opus 5 and Moonshot Kimi K3.
This is an important part of the global competition with American AI labs. Chinese models have already surpassed American ones in the number of tokens processed per month, demonstrating the scale and speed of the industry's development in China.
Alibaba will release its second-quarter financial report on Thursday, August 20. The key question is whether revenue from AI products is growing at a pace that justifies selling non-core assets for the sake of the new strategy.
My take: Alibaba's move is a telling example of how major corporations are reshaping their portfolios to fit the realities of the AI economy. Selling a profitable but non-strategic business to accelerate in the AI race is a risky but timely bet. The market will closely watch the quarterly figures: if the AI segment fails to show explosive growth, investors may question the wisdom of such a trade-off.