Alibaba Sells Gaming Studio to Focus on AI Buildout

Alibaba is shifting its focus from in-house game development to artificial intelligence (AI) infrastructure, selling its gaming studio, Lingxi Games, to Asian private equity firm Trustar Capital for at least $1.5 billion.

The sale of Lingxi Games, which developed the mobile multiplayer strategy title "Three Kingdoms: Strategy Edition", transfers Alibaba's entire stake in the studio and takes the Chinese tech giant out of in-house game development entirely. This move is part of Alibaba's efforts to free up cash for its AI infrastructure program, which has already exceeded its original $53 billion budget.

According to an internal staff memo sent by Lingxi CEO Zhou Bingshu, Alibaba stands to collect more than $2 billion from the transaction. The sale is expected to support the studio's next phase, with Trustar described as having the industry resources to support the studio's growth.

Alibaba's decision to exit the gaming business is not unique, as Micron has also exited its consumer business. The company's focus on AI infrastructure is part of its broader strategy to become a leader in the field, with a goal of generating $100 billion in AI revenue within five years.

## Alibaba's AI Infrastructure Program

Alibaba's AI infrastructure program is a significant undertaking, with the company committing at least 380 billion yuan (around $53 billion at the time) to cloud and AI infrastructure over three years. The program is expected to blow past its original budget, with CEO Eddie Wu stating that the company would exceed that figure given the cost of its data center buildout.

Asset sales, including the sale of its stakes in hypermarket chain Sun Art and department store operator Intime, are covering part of the bill for Alibaba's AI infrastructure program. The company is also preparing an IPO for its chip design unit T-Head, another route to capital for the same program.

## Lingxi Games and Trustar Capital

Lingxi Games is a Guangzhou-based studio best known for "Three Kingdoms: Strategy Edition", a mobile multiplayer strategy title developed with Japan's Koei Tecmo. The studio had been shopping around for a buyer for some time, with a fundraising process in late 2023 stalling after Beijing proposed tighter rules for the online gaming sector.

Trustar, formerly known as CITIC Capital, is an Asia-focused private equity firm that has the industry resources to support the studio's next phase. The sale leaves Alibaba's consumer business focused on e-commerce and its Qwen chatbot, whose own team leadership put Chinese firms' odds of leapfrogging OpenAI and Anthropic at less than 20% earlier this year.

## Comparable Figures

| Figure | Description | | --- | --- | | $1.5 billion | Minimum sale price of Lingxi Games to Trustar Capital | | $2 billion | Expected sale price of Lingxi Games to Trustar Capital | | $53 billion | Original budget for Alibaba's AI infrastructure program | | $100 billion | Target AI revenue for Alibaba within five years | | 380 billion yuan | Commitment to cloud and AI infrastructure over three years |