Lenovo and Alat “marry”, Saudi capital progresses from “buying stocks” to “building an industry”

In 2014, Tesla issued a convertible bond, which was one of the largest debt financings in its history. The principal amount is about 2 billion US dollars, using the classic “convertible bonds+bond hedging+share warrants” structure.

That money supported the construction of the Tesla Gigafactory and the development of two new cars, prevented the company from running out of capital before the Model 3 was mass-produced; it promoted Tesla from a “niche sports car factory” to a “mass production car company.”

This kind of “painless financing” helps companies obtain huge amounts of capital at extremely low interest rates, while effectively managing the risk of capital dilution. The latter half of the story is: Tesla's business has improved dramatically, delivery volume and revenue have exploded; investor confidence has boosted, and stock prices have been bullish for a long time.

The stock price of Tesla's 1.25% bonds due in 2021 far exceeds the conversion price and mass conversion, and investors profit 800% to 840%.

Tesla was not the first company to use the classic “convertible bonds+warrants” hedging structure; it was already used in the tech industry in the early 2000s. However, after Tesla's high-profile and successful use, tech giants (such as Alibaba, Supermicro, etc.) have taken on more practices, especially in 2020-2025, and have even spawned the significance of another major industrial cooperation, such as cooperation between Lenovo Group and Saudi capital.

In May 2024, Lenovo Group announced that it had reached a strategic cooperation with Alat, a company under the Saudi Public Investment Fund (PIF). Alat invested $2 billion in Lenovo in the form of three-year zero-interest convertible bonds. After maturing, bonds can be converted into shares at the initial conversion price of HK$10.42 per share. At the same time, the two sides reached in-depth industrial cooperation, including the establishment of Lenovo's regional headquarters and advanced manufacturing plant in Saudi Arabia.

The Saudi Sovereign Wealth Fund (PIF) has long played the role of a “superinvestor” in global capital markets. From buying Nintendo and Uber shares in the secondary market to directly acquiring Newcastle United in the Premier League, the investment logic of Saudis is often viewed as passive financial allocation or simple influence construction.

However, with the establishment of Alat and the implementation of its cooperation with Lenovo Group, a new Saudi capital evolution model was established, and huge oil dollars were accurately transformed into the country's industrial capacity.

This cooperation model is an example of a win-win situation: first improving the balance sheet of the invested company, and the project directly drives sales performance and supports stock prices; Saudi Arabia has obtained what it has been dreaming of — the top ten ICT hardware manufacturers in the world are rooted in it.

The binding of capital and industry

As early as 2005, Lenovo obtained distribution networks and customers in the Middle East through IBM to export PC products to the Middle East. Previously, Lenovo mainly focused on the Chinese and Asian markets. By 2021, Lenovo became the number one PC market share in the EMEA market for the first time. These all paved the way for Lenovo to reach a strategic cooperation with Saudi capital.

PIF wants to boost the overall growth of the Saudi economy, which means it invests in companies at various stages of development, which makes maintaining stable returns more complicated. The fund has established 93 companies over a period of 5 years, covering 13 strategic industries (from healthcare to sports and tourism) that PIF is responsible for developing. The portfolio companies cover a wide range, from real estate developers to large smart cities under construction Neom, Riyadh Airlines, etc.

Alat was founded in 2024, focusing on electronics and advanced industrial manufacturing, with the goal of attracting 100 billion US dollars in investment and creating 39,000 jobs by 2030. The Lenovo project is the first case where the world's top ten ICT hardware manufacturers have implemented a local production system. It will drive an ecosystem of components, logistics, and system integration to gather here.

Lenovo and Alat are not a simple equity partnership, but a carefully designed “long-term partnership tied to capital and industry.”

For Saudi Arabia, this also marks a fundamental shift in its investment strategy — no longer being satisfied with Wall Street-style book returns, but instead allowing the investee companies to bring technology, production capacity, and talent to Riyadh to help them build a real technology industry chain in the desert.

After experiencing the illusion and pain of the desert city utopia Neom project, Lenovo's project represents a more stable and touchable future—a technological manufacturing hub that no longer only relies on oil, but also has its own hematopoietic capabilities.

The collaboration between Lenovo and Alat is expected to contribute about $10 billion to Saudi non-oil GDP by 2030, creating 15,000 direct jobs and 45,000 indirect jobs. Lenovo has also launched a talent development program, cooperating with the Saudi Human Resources Development Fund to train local graduates to enter factories and global facilities. This not only enhances Lenovo's regional competitiveness, but also adds a stable anchor point to the global supply chain.

For Lenovo, this is not only a stable anchor for hedging risks in the global supply chain, but also a key reserve of energy completed on the eve of the AI hardware explosion using Saudi capital leverage.

The core of the deal was Alat's subscription for a $2 billion three-year zero-interest convertible bond issued by Lenovo. The initial conversion price of the bonds was HK$10.42 per share, a 10% premium over the average closing price of the 30 trading days prior to the signing of the bond subscription agreement.

After three years, if Lenovo's stock price shows strong performance, the bonds can be converted to Lenovo shares, and Alat will become an important shareholder. This is a typical “capital for share+industry landing” model: the zero-interest design reduces Lenovo's financing costs, while the conversion mechanism provides Alat with upward potential.

In the same period, Lenovo also issued 1.15 billion three-year warrants at an issue price of HK$1.43 each, ultimately raising approximately US$1.15 billion. The warrants were oversubscribed, with management subscribing rates as high as 43%, unleashing strong internal confidence in the company's long-term growth. The funds are used to repay debt, supplement working capital, and support global expansion.

This structure cleverly improved Lenovo's balance sheet, injecting real money while avoiding immediate stock dilution. During the recovery period of technology stocks, this helped Lenovo lock in capital and support the expansion of businesses such as AI servers and edge computing.

Lenovo: Supported before hardware demand exploded

The capital expenditure of global tech giants continued to explode throughout 2025. Since the release of ChatGPT in November 2022, the market value of the “Big Seven US Stocks” has risen sharply. Wealth drives spending, and they invest huge sums of money in AI and cloud infrastructure. According to the financial report for the third quarter of 2025, the giants' annual capital expenditure exceeds 400 billion US dollars, an increase of 30%-50% over 2024, mainly driven by AI training, inference requirements, and data center expansion.

Huge investment directly drives demand for AI servers and data center hardware. Hardware giants such as Nvidia, Lenovo, Dell, and Supermicro have benefited significantly from it, and their share of AI-related revenue has soared. The global AI server market is expected to reach US$252 billion in 2025, an increase of 55% over the previous year.

Despite the “AI bubble” rhetoric in the market, major technology companies remain aggressive. Huang Renxun has stated many times that data centers are fully migrating from “traditional computing architectures” to “accelerated computing architectures,” and this transformation will continue for at least ten years. Su Zifeng also estimates that by 2030, the AI and data center computing market will reach 1 trillion US dollars per year.

There is a shortage of chips and servers due to the spread of AI, and this trend shows no sign of slowing down. In this context, it is significant that Lenovo has obtained Saudi capital.

IDC predicts that the IT market in the MEA (Middle East and Africa) region is expected to reach 38 billion US dollars by 2027, and is growing strongly. Lenovo has set up an MEA regional headquarters in Riyadh and invested in the construction of a 200,000 square meter project, which is expected to be put into operation in 2026, with an annual production capacity of millions of PCs and servers; using a local R&D team, it will achieve an end-to-end closed loop made in Saudi Arabia.

This layout will significantly enhance Lenovo's supply chain resilience: Localized production can enjoy tax incentives, tariff relief, and the low cost advantages of clean energy, and optimize regional profit margins. Meanwhile, Saudi Arabia's large-scale data center construction and AI infrastructure implementation will drive a surge in demand for local servers. Lenovo Neptune's liquid cooling technology and cost-effective AI infrastructure are in line with the trend of generative AI moving from the cloud to the edge.

Goldman Sachs maintained Lenovo's “buy” rating in its December 2025 report, with a target price of HK$13.25. The report raised Lenovo's revenue forecast for the 2026-2028 fiscal year by 1%-2%. The core logic is that AI server demand spillover and supply chain management hedge cost pressure. “We are optimistic about the expansion of the company's server business and believe that the growth in generative AI demand will bring opportunities to Lenovo in terms of AI infrastructure and edge AI devices.”

In addition, Lenovo has a leading position in the PC market and is continuously increasing its market share in industry consolidation, upgrading its product portfolio to AI PCs, and better managing the supply chain during a cycle of rising memory costs. Based on these factors, Goldman Sachs has maintained a positive judgment on Lenovo since the September quarterly results were released.

Many of Lenovo's key customers have also settled in Saudi Arabia and other countries.

The political and economic relationship between China and Saudi Arabia is becoming closer, and more and more Chinese companies are setting their sights on Saudi Arabia. Since 2001, Saudi Arabia has been China's largest trading partner in the Middle East; China has been Saudi Arabia's largest trading partner since 2013, and has remained so. Traditional fields such as energy, infrastructure, and trade are still the mainstream of economic exchanges between the two countries; at the same time, the share of new infrastructure, including artificial intelligence and cloud computing, is also gradually rising.

Chinese companies such as Alibaba Cloud, Tencent Cloud, HUAWEI CLOUD, Shangtang Technology, SF Express, and Jitu are flocking in. In their view, Saudi Arabia is the fulcrum of the Middle East, and behind it, there is also a more open market in the Gulf region, which is ushering in a historic development opportunity.

Currently, Alibaba Cloud's largest server supplier is Lenovo Group. Lenovo mainly provides customized high-performance server products for Alibaba Cloud. In Alibaba's 380 billion yuan investment plan, server procurement accounts for an important share. From April to June 2025, Lenovo's AI server revenue increased 155% year-on-year, thanks to deep joint development and manufacturing with companies such as Alibaba and ByteDance.

The Lenovo case has set a new example: Chinese technology companies seek a decentralized layout, and Middle Eastern capital drives the upgrading of local manufacturing. Against the backdrop of a definite rise in demand for AI hardware, Lenovo's MEA layout will improve the quality of growth; for Saudi Arabia, this is a key step in moving from the consumer market to a technological manufacturing hub.

In the midst of this double transformation of capital and industry, Lenovo is expected to face a double blow from Davis in valuation and performance. And this “Chinese manufacturing capacity+Middle Eastern sovereign capital” cooperation model has only just begun.

Author of this article: Hayashi Hajime