Chinese tech giant Alibaba Group Holding (BABA) is completing a strategic pivot by selling its gaming unit, Lingxi Games, to investment firm Trustar Capital. Based on my estimates, the deal exceeds $1.5 billion, confirming the seriousness of the corporation's intentions.
This decision is not a spontaneous move but a logical continuation of the course set by CEO Eddie Wu. Since he took the helm, the company has consistently divested non-core assets, concentrating resources on two key areas: artificial intelligence and cloud computing. The sale of Lingxi Games is just another, albeit highly telling, link in this chain.
The Logic Behind Asset Divestment
Lingxi's head, Zhou Binshu, emphasized in a message to employees that transferring the business to Trustar will allow Alibaba to "better focus on its strategic priorities." Watching the company's actions, I can say this is not just rhetoric. In January 2025, Alibaba already sold a controlling stake in retail chain Sun Art Retail Group to DCP Capital for approximately $1.6 billion. It is clear that Eddie Wu is methodically cleaning the portfolio of anything unrelated to high-margin technology segments.
Interestingly, Trustar Capital outbid strategic investors from the gaming industry in the race for this asset. The final price exceeded initial market expectations: experts had forecast around 9 billion yuan, but the actual figure surpassed those estimates.
The Race for $100 Billion in AI
The main motive behind this deal is the ambitious goal announced in March: achieving combined revenue from AI and cloud services of $100 billion over the next five years. To this end, the company has already reserved 380 billion yuan (approximately $53 billion) over three years. These are not just promises—the pace of development is accelerating. This week, Alibaba unveiled its most powerful model, Qwen3.8-Max, which ranked fourth among coding models on the Arena platform, trailing only giants like Claude Opus 5 and Moonshot Kimi K3.
Chinese AI models have already surpassed American ones in the number of tokens processed per month, and Alibaba clearly intends to strengthen this leadership. The second-quarter financial report, due out Thursday, August 20, will be a key indicator: whether AI product revenue can grow fast enough to justify such a radical restructuring.
My take: This is a classic example of corporate transformation, where a company sacrifices current profits for future growth. However, betting on AI is a double-edged sword: if capital investments do not pay off within the stated timeframe, shareholders may lose patience. Alibaba is going all in, and how quickly AI developments are monetized will determine not only the company's value but also the balance of power in the global technology race.