Alibaba is spending heavily in order to keep up in China's fierce artificial-intelligence competition and that means some other units might have to go. The Chinese e-commerce company is selling its videogame arm in a deal worth at least $1.5 billion.

Alibaba has agreed to sell Lingxi Games to Asian private-equity firm Trustar Capital, The Wall Street Journal reported, citing an internal memo. A company confirmed the sale to the Journal, saying it would "sharpen its strategic focus."

American depositary receipts of Alibaba were up 0.6% in morning trading but are down 15% this year.

The move comes ahead of Alibaba's earnings report on Wednesday, when the company is likely to reveal the scale of its spending on AI infrastructure. In its previous earnings report, Alibaba attributed a sharp drop in adjusted earnings to investments in its technology and quick commerce businesses.

Alibaba has been trimming some of its operations in recent years, having sold its stakes in hypermarket chain Sun Art and department-store operator Intime for a combined $2.6 billion in late 2024.

The company was previously reported to be considering an initial public offering for its T-Head chip unit, amid a frenzy of AI-related IPOs in the Chinese market. ChangXin Memory Technologies, or CXMT, recently became China's most valuable listed company by market capitalization less than a month after its own listing.