Alibaba is divesting its gaming division Lingxi Games for more than $1.5 billion as it focuses on artificial intelligence

Chinese tech giant Alibaba continues its large-scale restructuring by parting with one of its significant but non-core assets: the developer and publisher of mobile games Lingxi Games. The company has reached an agreement to sell its gaming division to Asian private equity firm Trustar Capital. Although the exact deal value has not been officially disclosed, Bloomberg estimates that it exceeds $1.5 billion. The decision is part of Alibaba’s broader strategy under new CEO Eddie Wu, aimed at optimizing its asset portfolio and concentrating resources on future-critical areas: artificial intelligence (AI), cloud computing, and e-commerce.

Lingxi Games CEO Zhou Binshu informed employees about the deal in an internal memo, stressing that the move will allow Alibaba to focus on its strategic priorities. It is a telling sign from Alibaba that the company is willing to give up even a large and potentially profitable gaming business if the capital and management resources freed up can be used more effectively to develop the areas that will define the future.

Strategic shift: betting on artificial intelligence

The sale of Lingxi Games is a key element in Alibaba’s ambitious transformation, which aims to generate $100 billion in AI revenue over the next five years. This reflects a fundamental shift in the company’s business model as it seeks to become a leading player in the global AI market rather than remain limited to its traditional e-commerce business.

Last August, Alibaba unveiled its largest artificial intelligence model, showing results that company representatives said were comparable to leading U.S. AI models. This is a clear signal of Alibaba’s global ambitions in AI. The company is actively restructuring its asset portfolio around AI and cloud technologies. The sale of Lingxi Games for more than $1.5 billion is a vivid confirmation of the scale of these changes.

This trend extends far beyond the Chinese market. Major technology companies around the world are increasingly reallocating capital in favor of artificial intelligence. While gaming businesses typically generate stable cash flow, AI development requires massive investment in computing power, data centers, models, and proprietary infrastructure. Alibaba is choosing between retaining a large but perhaps less strategic asset and freeing up capital to invest in the technology it sees as central to its future. Alibaba’s choice is clear: the bet is on AI.

Lingxi Games: from leading developer to new owner

Lingxi Games is not just a small studio, but a major Chinese developer and publisher of mobile games. Alibaba has repeatedly described Lingxi as one of the leading players in China’s mobile gaming market. According to Sensor Tower, in fiscal 2024 the company ranked among the top five mobile game companies in mainland China by gross revenue in the App Store.

Lingxi Games’ best-known title is “Three Kingdoms: Strategy Edition” — a large-scale multiplayer strategy game developed in collaboration with Japanese company Koei Tecmo. Based on the historical novel “Romance of the Three Kingdoms,” the game became one of Lingxi’s key assets. In addition, Alibaba also developed other projects under the Lingxi brand, including “Three Kingdoms Fantasy Land” and “Ashes of the Kingdom.”

After the deal with Trustar Capital, the Asian private equity firm, Lingxi Games will come under new ownership. However, according to CEO Zhou Binshu, the studio’s management team will most likely remain in place. For Trustar Capital, this is an opportunity to acquire an established gaming business with well-known products and a substantial audience. For Alibaba, it is a way to free up resources and focus on its main strategic direction: the development of artificial intelligence.

In this way, one of China’s largest technology companies is demonstrating a radical shift in its business strategy. The move from traditional digital services and games to large-scale AI infrastructure is a key trend that will shape the future of the technology sector. By selling its gaming division, Alibaba is not simply shedding an asset, but actively investing in a future in which artificial intelligence will play a central role. The move underscores the rapid pace of change in the market and the company’s strategic vision as it aims to remain at the forefront of technological progress.