HANGZHOU, China: Alibaba is tapping global debt markets once again, unveiling plans to raise US$3.2 billion through a zero-coupon convertible bond that will bankroll cloud computing upgrades and international growth.

The offering will be the largest convertible bond deal this year, surpassing DoorDash's $2.75 billion raise in May, according to Dealogic.

Alibaba said nearly 80 percent of the proceeds will be directed toward its fast-growing cloud business, including data center expansion, technology upgrades, and new service offerings. The remainder will support efficiency improvements and international e-commerce ventures.

The bond carries a conversion premium of 27.5 percent to 32.5 percent above Alibaba's U.S.-listed stock price, according to a term sheet seen by Reuters. It will mature on September 15, 2032, with conversion into U.S.-listed shares as an option.

Investors initially reacted cautiously. Alibaba's Hong Kong-listed shares fell as much as 2.6 percent to HK$139.10 on September 11, outpacing a 0.7 percent drop in the Hang Seng Index. Its New York-listed shares also slipped 2.2 percent a day earlier. Still, the stock remains one of this year's best performers, up more than 71 percent in both Hong Kong and New York.

The deal underscores Alibaba's determination to maintain its lead in artificial intelligence and cloud computing. The company has pledged to spend 380 billion yuan ($53.37 billion) over three years on AI, which executives say is already boosting its cloud revenues.

"Our investments in AI have begun to yield tangible results," CEO Eddie Wu told analysts during an earnings call last month. "We are seeing an increasingly clear path for AI to drive Alibaba's robust growth."

Alibaba has been a frequent issuer of convertible instruments. In July, it raised $1.5 billion via an exchangeable bond, following a $5 billion convertible bond offering in May 2024.

Convertible bonds have surged in popularity in Asia's capital markets over the past six months. Issuers like China Pacific Insurance, which also announced a HK$15.55 billion ($2 billion) zero-coupon convertible bond on September 11, are increasingly using the structure to combine lower debt costs with potential equity upside for investors.

Dealogic data shows $27.8 billion of convertible bonds have been sold in Asia-Pacific this year, just shy of last year's $28.7 billion at the same point — the strongest stretch for issuance in three years.