Alibaba Group Holding Ltd. ADR (BABA  ) is reportedly offloading its gaming unit, Lingxi Games, to Asian private-equity firm Trustar Capital in a bid to bolster its focus on artificial intelligence (AI). The Chinese tech behemoth is selling Lingxi Games for a minimum of $1.5 billion. The exact transaction size was not disclosed by Lingxi Games Chief Executive Zhou Bingshu, who stated that the sale is "part of Alibaba's overall road map to sharpen its strategic focus," The Wall Street Journal reported on Monday, citing an internal memo.

Alibaba stock climbed 1.08% during the Monday pre-market trading session.

Alibaba did not immediately respond to Benzinga's request for comments.

Alibaba Sharpens Focus On AI

This divestiture comes at a time when Alibaba is making significant strides in the AI industry. Alibaba's AI model downloads have seen a substantial surge in the last six months, surpassing those made by Meta Platforms Inc. (META  ) and Alphabet Inc. (GOOGL  ) (GOOG  ). With over 460 open-source models, Alibaba's AI models have become the largest in the world, generating more than 300,000 derivatives.

Alibaba's AI models have gained traction after Apple Inc. (AAPL  ) began using them in China, but Apple is now reportedly developing its own AI models for the Chinese market with Alibaba's support.

The Chinese tech giant has been streamlining its portfolio by making non-core businesses profitable or selling them, freeing resources for AI and e-commerce investment. In late 2024, it sold stakes in Sun Art and Intime for a combined $2.6 billion.

Gaming Stays Hot as Firms Retreat

Meanwhile, the gaming industry continues to thrive, with companies like Take-Two Interactive Software Inc. (TTWO  ) reporting strong fiscal first-quarter results and unprecedented pre-orders for its new game.

Despite gaming being a highly lucrative and major focus for tech investment, some companies are pulling back, with ByteDance selling its gaming studio Moonton earlier this year.