Alibaba is selling its gaming studio for at least $1.5 billion to help fund AI buildout, mirroring Micron’s exit from consumer business — dumps entire stake in Lingxi Games, which made ‘Three Kingdoms: Strategy Edition’

Alibaba has agreed to sell its game development unit, Lingxi Games, to Asian private equity firm Trustar Capital, according to an internal staff memo sent Monday by Lingxi CEO Zhou Bingshu, per Reuters. A person familiar with the matter told Reuters that Alibaba stands to collect more than $2 billion from the transaction, while Bloomberg, which first reported the memo, valued the studio at no less than $1.5 billion. The sale transfers Alibaba’s entire stake in the studio and takes the Chinese tech giant out of in-house game development entirely, freeing up cash for an AI infrastructure program the company has already said will blow past its original $53 billion budget.

“Alibaba is handing Lingxi to Trustar due to better focus on its strategic priorities,” Zhou wrote in the memo, as quoted by Bloomberg. Zhou and his management team will stay on to run the studio under its new owner. The memo didn’t disclose a price, an expected closing date, or any regulatory conditions attached to the deal, and none of the three companies responded to requests for comment.

Alibaba committed at least 380 billion yuan (around $53 billion at the time) to cloud and AI infrastructure over three years in February last year, a sum the company said was larger than everything it had spent on AI and cloud in the previous decade combined. CEO Eddie Wu told analysts in May that Alibaba would exceed that figure given the cost of its data center buildout, and the company is targeting $100 billion in AI revenue within five years.

Asset sales are covering part of the bill, with Alibaba having offloaded its stakes in hypermarket chain Sun Art and department store operator Intime for a combined $2.6 billion in late 2024.

Back in January, it was reported that the company is preparing an IPO for its chip design unit T-Head, another route to capital for the same program. T-Head designs the PPU accelerator that Chinese state television compared against Nvidia’s H20 last September, and its silicon is central to Alibaba’s plan to run more of its cloud on domestic hardware.

Guangzhou-based Lingxi is best known for Three Kingdoms: Strategy Edition, a mobile multiplayer strategy title developed with Japan’s Koei Tecmo. It’s understood that Alibaba had been shopping the studio around for some time, per two unnamed sources, and a fundraising process Lingxi explored in late 2023 stalled after Beijing proposed tighter rules for the online gaming sector.

Trustar, formerly known as CITIC Capital, is an Asia-focused private equity firm that Zhou described in the memo as having 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.