Artificial intelligence
Z.ai Raised $5 Billion It Has Not Finished Spending
Z.AI told the Hong Kong exchange on Sunday it is raising about $5 billion — a discounted placement plus $3 billion of zero-coupon convertibles — two months after a $4 billion raise it has spent barely a third of. The structure says this is an option on compute, not a cash need.
MAI
Z.AI Co. — the Hong Kong-listed company still widely known as Zhipu AI — told the exchange on Sunday that it is raising about $5 billion, split between a discounted share placement and $3 billion of zero-coupon convertible bonds. It is the company's second multibillion-dollar capital raise in two months. Its own filings show that most of the money from the first one has not been spent yet.
Shares fell roughly 7 per cent on Monday to HK$739, the lowest since 31 March, after dropping more than 10 per cent intraday. That is a rational response to what was actually announced, and it is worth separating from the broader AI-slowdown trade that dominated the same session. Z.ai fell for a company-specific reason: its existing shareholders were told they would be funding the next compute cycle at a discount to Friday's close.
What the filing says
| Component | Terms |
|---|---|
| Share placement | 21.965m H shares at HK$714, a 9.96% discount to the HK$793 close; ~HK$15.7bn gross |
| New shares | ~4.5% of enlarged share capital |
| Convertible bonds | RMB 20.14bn (~$3.0bn) principal, zero coupon, due September 2027, issued at 100.5% of face value |
| Conversion price | HK$892.50, a 25% premium to the placement price |
| Issuer call | From 18 February 2027 if shares trade at 130%+ of conversion price for 20 of 30 trading days |
| Use of proceeds | 60% next-generation GLM models and computing infrastructure; 15% expansion, strategic investment and acquisitions; 25% capital structure and working capital |
The company has said it expects to deploy the proceeds by 30 June 2028.
The unspent money is the tell
Z.ai's July placement produced net proceeds of about HK$31.4 billion. As of 31 August, roughly HK$10.9 billion of that had been deployed, leaving about HK$20.4 billion — some $2.6 billion — unused. A company raising $5 billion while sitting on $2.6 billion it has not yet spent is not raising money because it has run out.
It is buying optionality. The convertible structure makes that explicit. A zero-coupon bond due in twelve months pays the holder nothing to wait; the entire return sits in the conversion price, 25 per cent above where the placement cleared. Buyers are not lending Z.ai money at a yield. They are writing it a cheque in exchange for a one-year call option on a stock that has gone from a HK$116.20 January IPO price to the high HK$700s. Z.ai gets $3 billion at zero carry and, if the shares keep climbing, never repays it in cash.
That is a sensible trade for an issuer that believes two things at once: that its equity is expensive, and that compute it wants to buy over the next two years will be scarcer than the money to pay for it. Chinese accelerators are the constraint, not capital. Z.ai claimed in January that GLM-Image was trained entirely on domestic silicon — Huawei Ascend 910C accelerators in Atlas 800T A2 servers — though it has never disclosed cluster size, training throughput or cost, which is exactly the information needed to judge how good a substitute that stack really is. A lab betting on domestic hardware has a stronger reason than most to pre-buy capacity.
What the valuation is now carrying
The gap between what Z.ai earns and what it is worth is the part that should give investors pause. At Friday's close the company was capitalised at roughly HK$369 billion, about $47 billion. Trailing twelve-month revenue is about HK$1.72 billion — up 224 per cent year on year, and roughly one two-hundredth of the market value. The prospectus for the January listing showed first-half 2025 revenue of 191 million yuan against a net loss of 2.36 billion yuan, with 1.6 billion yuan of R&D and 1.15 billion yuan of computing service fees. The revenue has grown very fast. It has not grown into the valuation, and each raise widens the distance.
Z.ai is not alone in going to public markets for compute money. A report in 21st Century Business Herald, summarised in Korean and English trade press, counts MiniMax at $2 billion in July, Tencent at $4.7 billion of bonds in June, Alibaba at HK$80 billion in August and a $29.6 billion syndicated loan for ByteDance. What distinguishes Z.ai is that it is the first of the Chinese "AI tigers" to be listed, which means it is the first whose compute ambitions get repriced by shareholders in a single session rather than negotiated privately with investors.
Monday's session was the first working example of that. The answer it gave was that a frontier lab can raise $5 billion in a weekend and still be worth 7 per cent less on Monday afternoon for doing it.
Sources: Reuters, via The Express Tribune · Bamboo Works · TechNode Global · Investing.com · CNBC · Caixin Global · The Register · StockAnalysis · Seoul Economic Daily