Alibaba Sells Lingxi Games for $1.5B, Pivots to AI on August 20

Alibaba Group confirmed on August 17 that it is selling its gaming business Lingxi Games to Asian private equity firm Trustar Capital for at least USD 1.5 billion. The deal represents a major strategic pivot toward artificial intelligence and cloud computing. Under CEO Wu Yongming, the company has set a goal to reach USD 100 billion in AI revenue within five years and is shedding non-core assets to fund that ambition.

Why Alibaba is selling its gaming arm

Lingxi Games is a mature, cash-generative business but no longer in rapid growth. Its flagship title, Three Kingdoms Tactics, launched in 2019 and has surpassed 100 million registered users worldwide. According to third-party data, the game generated roughly RMB 180 to 250 million (USD 26.6 to 37.0 million) in monthly gross player spending in 2025. Lingxi employs about 1,200 staff across five R&D studios and two operations businesses. Despite this stable revenue, Alibaba decided the unit no longer fits its strategic priorities.

The deal and competing bidders

Trustar Capital won the auction after competing against other Chinese gaming firms including 37 Interactive Entertainment and Giant Network. In June, Alibaba had sought to sell Lingxi for RMB 7 to 9 billion (USD 1.0 to 1.3 billion), but the final deal valued the unit higher. Lingxi CEO Zhou Bingshu confirmed in an internal memo that the transaction was reached in a friendly, mutually beneficial atmosphere. The exact closing timeline and regulatory approval details have not been disclosed.

Alibaba’s AI and cloud strategy

The sale follows Alibaba’s earlier divestitures of Sun Art hypermarket and Intime department store. Alibaba Cloud’s external revenue grew 40% year-over-year in the most recent quarter, accelerating faster than group revenue growth of 11%. The company recently launched its largest AI model, which reportedly matches the performance of Anthropic’s leading systems. Alibaba’s Qwen AI model has exceeded 3 billion downloads, making it the most-downloaded open-weight model family globally.

Stock reaction and valuation

Alibaba shares jumped as much as 3% on the news. Meyka rates BABA a B+ with a 12-month price target of USD 150.36, suggesting modest upside from the current USD 128.90 level. The Hong Kong-listed 9988.HK trades at HK$124.20 with a Meyka grade of B+. Both listings carry a PE ratio near 19x, slightly above the sector average, reflecting investor expectations for AI-driven growth.

Final Thoughts

The Lingxi sale signals Alibaba’s commitment to AI and cloud as its primary growth engines. With Meyka grading the stock B+ and cloud revenue accelerating 40%, the capital redeployment strengthens the company’s ability to compete in generative AI.

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