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The slower summer months haven't cooled down appetite for new M&A among Chinese Internet firms, with word that e-commerce leader Alibaba (NYSE:BABA) is chasing a massive investment that could see it purchase a stake in US social networking high-flyer Snapchat. At the same time, software security specialist Qihoo 360 (NYSE:QIHU) has just announced new plans to raise up to $1 billion through a convertible bond offer, in what also could be the prelude to a major new acquisition.

Let's start with Alibaba, whose latest potential mega-investment comes as it worries over losing ground in the important social networking (SNS) space to archrival Tencent (OTCPK:TCEHY) (HKEx: 700). Alibaba made a major move into SNS with its purchase of a stake in the Twitter-like Weibo (NASDAQ:WB) last year; later in the year it also launched Laiwang, a mobile-based instant messaging service to compete with Tencent's (HKEx: 700) hugely popular WeChat.

According to the latest reports, Alibaba is in preliminary talks to take an unspecified stake in Snapchat, a popular mobile-based service that allows users to exchange photos. The deal could reportedly value Snapchat at around $10 billion - a hefty figure for a company that has very little revenue and operates an app with just 4 years of history. Based on Alibaba's previous purchases, I would expect the company to target a 10-20 percent, stake, which would equate to a $1-$2 billion investment.

Such a move would certainly make sense for Snapchat, providing it with needed growth capital and a potent partner if it ever decides to enter China. Such a tie-up would also be attractive for Alibaba from a purely investment perspective, since Snapchat's value is almost certain to rise sharply over the next few years. But that said, I don't really see the kind of strategic synergies that Alibaba might be hoping for as it looks for better ways to challenge Tencent in SNS.

Next let's look at Qihoo, which is one of China's largest second-tier Internet companies that has yet to embark on the kind of buying sprees that we've seen from the top-tier trio of Tencent, Alibaba and Baidu (Nasdaq: BIDU). Qihoo has just announced a plan to sell $900 million worth of 6- and 7-year convertible bonds, with an option to sell another $135 million worth. The offering would more than double Qihoo's current cash pile, and would come less than a year after the company offered $600 million in similar bonds.

This particular offer is one of a long string of similar convertible bond sales by China's major Internet companies over the past 2 years, with other sector leaders like Baidu, Tencent, Ctrip (NASDAQ:CTRP) and SouFun (NYSE:SFUN) raising similar amounts. Qihoo says only that it will use the money for general corporate purposes, and there are indeed quite a few areas where it could use the funds.

One such area could be web-based games, following Qihoo's announcement this week that it will set up a gaming joint venture with The9 (NASDAQ:NCTY), a veteran but relatively small player in China's online game space. But that venture looks relatively small, and is unlikely to require such major funds. Qihoo could also make a bid to buy The9 itself, which is valued at about $100 million. Such a purchase would be easily affordable, but doesn't look that interesting due to The9′s lackluster performance.

Qihoo could also use the funds to expand its fast-growing online search business,, which has taken more than 20 percent of China's search the market since its launch 2 years ago but still doesn't earn much money. Investors have bid up Qihoo's stock over the last 2 years on big hopes for, putting pressure on the company to quickly monetize the business.

Qihoo has also made some hints about a global expansion through a partnership with recently listed gaming company Sungy Mobile (NASDAQ:GOMO). But given its current meteoric valuation and big pressure to improve its profitability, I would bet this new fund-raising will be followed by an acquisition, perhaps in the gaming, SNS or search sectors, that can quickly improve the company's bottom line.

Bottom line: Alibaba is likely seeking to buy 10-20 percent of Snapchat to improve its SNS business, while Qihoo is likely to make a major acquisition following its new round of fund-raising.

Disclosure: None.