Alibaba is preparing to leave the in-house video game development business, agreeing to sell its gaming subsidiary Lingxi Games to private-equity firm Trustar Capital as the Chinese technology giant concentrates more heavily on artificial intelligence and cloud computing.
Lingxi, the developer behind the popular mobile title Three Kingdoms: Strategy Edition, is reportedly being valued at between $1.5 billion and more than $2 billion in the transaction.
The companies have not publicly confirmed the final purchase price.
The proposed sale was first reported by Bloomberg, while Reuters separately reported that the deal could exceed $2 billion.
Lingxi chief executive Zhou Bingshu told employees in an internal memo that the decision reflected Alibaba’s desire to maintain a tighter focus on its strategic priorities.
A Broader Retreat From Non-Core Businesses
The sale represents another step in Alibaba’s effort to simplify a sprawling corporate portfolio that expanded significantly during the years when its e-commerce operations generated substantial cash.
China technology analyst Rui Ma, founder of China-focused research platform Tech Buzz China, described the transaction as part of a broader effort to streamline the company rather than a dramatic reassessment of the gaming industry.
“It’s just cleaning up the cap table,” Ma told Fortune.
She said Lingxi is effectively a leftover from an earlier period when Alibaba was willing to place capital behind numerous businesses and industries.
That approach has become harder to sustain as Alibaba faces stronger competition in China’s domestic market from companies such as Pinduoduo and Meituan.
Rather than relying on its e-commerce business to finance a wide range of experiments, the company has increasingly been forced to determine which operations are central to its future growth.
AI Has Become Alibaba’s Bigger Bet
The gaming exit comes as Alibaba pours unprecedented resources into artificial intelligence and cloud infrastructure.
In February 2025, the company announced plans to invest approximately $53 billion over three years in AI and cloud infrastructure—an amount exceeding what it had spent in those areas during the preceding decade.
Chief executive Eddie Wu later indicated that Alibaba could surpass that commitment as the cost of expanding its data-center infrastructure continues to rise.
The company has also set an ambitious target of generating $100 billion in AI-related revenue by 2031, underscoring the scale of its shift toward the technology.
For Alibaba, the move into AI is supported by an asset it already possessed: a major cloud-computing operation capable of providing the infrastructure required to develop and commercialize AI services.
Gaming Was Never Alibaba’s Strongest Position
Alibaba’s departure from game development also reflects the company’s comparatively weaker position in an industry dominated by established competitors.
Tencent, in particular, has built a formidable global gaming business spanning mobile, PC and console titles.
Alibaba’s gaming operations never reached a comparable level of influence.
Ma said the company’s position in cloud computing provides a much more compelling foundation for its AI ambitions.
Alibaba can use its existing infrastructure to develop AI products while also monetizing demand for computing capacity from businesses adopting the technology.
The opportunity is substantial, although competition in China’s cloud and AI markets remains intense.
Beijing’s Industrial Priorities Add Another Dimension
Alibaba’s strategic shift is also taking place against the backdrop of China’s broader economic and industrial policy.
Usha Haley, a Wichita State University professor who has researched government support for Chinese companies and testified before Congress, said major Chinese corporations have powerful incentives to align their investments with industries identified as strategically important by Beijing.
AI and advanced computing are among the technologies at the center of China’s long-term development ambitions.
Haley argued that private Chinese companies cannot be viewed entirely separately from those national priorities because government objectives are communicated clearly to businesses and can influence where companies direct capital.
Under that framework, Alibaba’s increasing emphasis on AI and cloud computing fits neatly with the sectors Beijing wants to strengthen.
Qwen Gives Alibaba a Global AI Profile
Alibaba’s Qwen family of AI models has meanwhile given the company a growing presence in the international AI race.
The company’s open-weight Qwen models were reportedly downloaded more than 3 billion times during the previous six months, according to figures cited by Fortune.
By that measure, Alibaba had surpassed major Western technology companies including Meta and Google.
That momentum helps explain why Alibaba is increasingly willing to redirect resources away from businesses that do not occupy a central role in its AI strategy.
The sale of Lingxi therefore appears less like an isolated gaming transaction and more like part of a larger corporate reshaping.
Alibaba is narrowing its focus, reducing exposure to non-core operations and directing more capital toward the technologies it believes will define its next phase of growth.
A More Focused Alibaba Emerges
For years, Alibaba’s size allowed it to maintain interests across e-commerce, entertainment, logistics, cloud computing and gaming.
That diversified model made sense when its core retail operations could generate enough cash to support a broad portfolio of bets.
The company’s current strategy is different.
By divesting Lingxi and concentrating investment on AI and cloud infrastructure, Alibaba is signaling that the era of pursuing numerous unrelated businesses is giving way to a more disciplined technology strategy.
The gaming business may have delivered a valuable exit, but Alibaba increasingly sees its future elsewhere—particularly in the infrastructure, models and services underpinning the rapidly expanding global AI economy.
