Alibaba Sells Lingxi Games to Trustar for US$1.5B

Key Takeaways

Trustar Capital has agreed to acquire Alibaba Group's Lingxi Games in a transaction that may value the studio at more than $1.5 billion.
The divestiture supports the chief executive officer's reorganisation of Alibaba Group around artificial intelligence and cloud computing.
Alibaba Group is targeting $100 billion in AI revenue within five years as hyperscalers accelerate infrastructure investment.

Alibaba Group Holding is selling Lingxi Games to Asian private equity firm Trustar Capital, shedding a gaming business as the chief executive officer concentrates resources on artificial intelligence and cloud computing.

Trustar Capital reached an agreement to acquire Lingxi Games, according to an internal memo distributed on Monday, August 17, and reviewed by Bloomberg News. The transaction may value the studio at more than $1.5 billion, although the memo did not disclose financial terms.

"Alibaba is handing Lingxi to Trustar due to better focus on its strategic priorities," the chief executive officer of Lingxi Games said in the memo.

Alibaba Group and Trustar Capital did not immediately respond to requests for comment. That leaves some transaction details, including the expected closing timetable and post-sale operating structure, unclear. Still, the strategic direction is fairly plain: Alibaba Group is reducing its exposure to businesses outside its main investment priorities.

Lingxi Games is not an empty portfolio asset. Its flagship and top-grossing title, Three Kingdoms: Strategy Edition, is a massive multiplayer online strategy game developed in partnership with Japan's Koei Tecmo Holdings. The studio therefore gives Trustar Capital an established product, operating expertise and access to a large gaming market rather than a speculative development pipeline alone.

Gaming remains a substantial global industry. The worldwide video game market was valued at about $202 billion in 2025 and is projected to reach $268 billion by 2031, representing a 4.86% compound annual growth rate. Mobile gaming contributed more than $113 billion in 2025.

So why sell a proven gaming operation? Opportunity cost offers one answer.

Worldwide AI spending is forecast to rise from roughly $1.5 trillion in 2025 to $2.5 trillion in 2026, driven by infrastructure, software and services. Separately, Gartner projected worldwide generative AI spending of $644 billion in 2025, a 76% year-over-year increase. Those figures illustrate the scale of the market Alibaba Group is pursuing, but they also point to the capital demands involved.

AI competition is expensive. Cloud providers need accelerators, servers, networking capacity, power, data-center space and engineering talent before enterprise demand consistently converts into revenue. Global spending on AI servers and accelerators is expected to reach about $267 billion as organisations build capacity. Selling Lingxi Games could give Alibaba Group additional flexibility to fund that expansion while reducing demands on senior management.

While $1.5 billion is meaningful, the larger signal may be organisational. The chief executive officer's restructuring indicates that AI is becoming the filter through which Alibaba Group evaluates capital allocation, management attention and the strategic relevance of individual business units.

Alibaba Group aims to generate $100 billion in AI revenue within five years. In August, the company also released its largest AI model to date and claimed performance comparable with Anthropic, a prominent global developer. Together, the model release and Lingxi Games sale show two sides of the same strategy. One adds technical capacity; the other removes a business that may no longer sit close enough to the core plan.

The pivot also places Alibaba Group more directly alongside Amazon Web Services, Microsoft Azure and Google Cloud, all of which are expanding GPU-rich infrastructure and foundation-model services for enterprise customers. For B2B technology buyers, competition among these providers could broaden model choice and create more options for deploying AI workloads across regions.

That said, model performance and infrastructure scale are only part of an enterprise buying decision. Customers also assess data controls, auditability, security, regulatory exposure and the ability to manage AI systems over time. Guidance such as the NIST AI Risk Management Framework is increasingly relevant when organisations compare AI platforms and establish internal oversight.

The lingering question is execution. Can Alibaba Group turn a sharper portfolio and greater infrastructure investment into durable enterprise AI revenue? The Lingxi Games sale removes one distraction and potentially releases capital, but hitting the $100 billion target will depend on customer adoption, product reliability and Alibaba Group's ability to compete beyond raw model benchmarks. Trustar Capital, meanwhile, gains a recognised gaming studio with an established flagship title. Both sides are placing focused bets, just in very different markets.

Editorial oversight by Rich Tehrani — CEO of TMC and creator of ITEXPO.

Disclosure: Rich Tehrani is also CEO of RT Advisors and a Registered Representative offering securities through Four Points Capital Partners LLC (Member FINRA/SIPC). Nothing in this article is an endorsement or recommendation to buy or sell any security or sector mentioned. RT Advisors may have or have had business relationships with companies mentioned in TMC Insight articles. Such relationships do not affect editorial judgment or coverage.