Chinese technology giant Alibaba Group Holding (BABA) is completing the next stage of its transformation by selling its gaming unit Lingxi Games to investment firm Trustar Capital. Based on my estimates, the deal exceeds $1.5 billion, confirming the corporation's serious intent to focus on artificial intelligence and cloud computing.
This decision is a logical continuation of the course taken by CEO Eddie Wu. The company is methodically divesting non-core assets to free up resources for its top priority. As early as January 2025, Alibaba sold a controlling stake in retailer Sun Art Retail Group to DCP Capital for approximately $1.6 billion. Now it is the gaming business's turn.
Lingxi head Zhou Binshu explained to employees that transferring assets to Trustar Capital will allow Alibaba to "better focus on strategic priorities." Notably, Trustar Capital outbid strategic investors from the gaming industry, emerging as the favorite in these negotiations. The final amount exceeded analysts' expectations, who had cited a benchmark of around 9 billion yuan.
The $100 billion goal: ambitions backed by resources
The key motive for the sale is the company's ambitious plan. In March, Alibaba announced its intention to exceed $100 billion in combined revenue from AI and cloud services over the next five years. Already, 380 billion yuan (approximately $53 billion) has been allocated to these areas over three years.
The pace is accelerating. This month, Alibaba unveiled its most powerful model, Qwen3.8-Max, which ranked fourth among coding models on the Arena platform, right behind versions of Claude Opus 5 and Moonshot Kimi K3. This is a crucial part of the race against American AI labs, where Chinese models have already surpassed Western competitors in monthly processed token volume.
The company will publish its second-quarter financial report on Thursday, August 20. The key question that will concern the market is whether revenue from AI products is growing fast enough to justify such a decisive divestment of non-core assets.
My view: Alibaba is acting flawlessly, converting disparate businesses into cash to compete for AI leadership. This is not just restructuring but a strategic reorientation that could fundamentally change the company's valuation in the long term. Watch the earnings report: if AI segment growth rates are confirmed, current multiples will look absurd.