Alibaba is Selling a $2 Billion Gaming Business to Focus on AI

Alibaba Group is expected to raise more than $2 billion from the sale of its gaming business Lingxi Games to private equity firm Trustar Capital, as the Chinese technology giant shifts capital and management attention toward artificial intelligence and cloud computing.

Alibaba and Trustar have reached a formal agreement after several rounds of talks, according to an internal memo sent to Lingxi employees on Monday by the game developer’s CEO Zhou Bingshu.

Under the agreement, Alibaba will transfer all of its stake in Lingxi to Trustar, the memo said. It did not disclose the value of the transaction or when it was expected to close.

The sale marks Alibaba’s latest move to streamline its portfolio as it concentrates on AI and cloud computing, areas it sees as central to its future growth. The company has been reviewing non-core assets as it directs more capital and management resources toward those businesses.

The transaction is expected to be worth more than $2 billion, according to a person familiar with the matter. Bloomberg News, which first reported the contents of the memo, said the deal would be worth at least $1.5 billion, citing sources.

Lingxi CEO Zhou and its management team will remain in place after the transaction, according to the memo, allowing the gaming studio to maintain continuity under its new ownership.

It was not immediately clear whether Alibaba would retain commercial ties with Lingxi after the sale, including through game publishing, cloud services or technology partnerships.

Alibaba’s AI pivot

Alibaba, one of China’s largest technology companies, operates major e-commerce platforms, cloud-computing services and other digital businesses. Its AI strategy has become increasingly important as Chinese technology companies compete to develop AI models and infrastructure.

The company has been increasing its focus on AI while facing a difficult environment for China’s consumer economy and intense competition across its traditional internet businesses.

Two people familiar with the matter said Alibaba had been seeking a buyer for Lingxi for some time. They spoke on condition of anonymity because the information is confidential.

Trustar, formerly known as CITIC Capital, has the industry resources and operational expertise to support Lingxi’s next stage of development, Zhou said in the memo.

For Alibaba, selling the gaming unit provides a way to unlock capital from a business outside its current strategic priorities while reducing the number of assets competing for management attention.

Lingxi’s hit game

Guangzhou-based Lingxi Games is best known for Three Kingdoms: Strategy Edition, a multiplayer strategy game based on China’s Three Kingdoms era.

The game was developed in collaboration with Japan’s Koei Tecmo Holdings, whose franchises include Romance of the Three Kingdoms and Nobunaga’s Ambition.

Lingxi had previously explored raising external funding, according to two sources familiar with the matter. A fundraising process planned for late 2023 stalled after China proposed tighter rules for the online gaming industry, one of the sources said.

The company also underwent a management reshuffle in 2024. Zhou, who had led the team behind Three Kingdoms: Strategy Edition, became chief executive after founder Zhan Zhonghui departed, according to Chinese corporate records.

Zhou and Lingxi’s management team are expected to continue running the company following the sale.

For Alibaba, the deal underscores how the rise of AI is reshaping the priorities of one of China’s largest technology companies. Rather than continue allocating capital across a broad portfolio of digital businesses, the company is increasingly directing resources toward AI and cloud computing, where it sees greater long-term strategic value.

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