Burry exits Alibaba, moves to JD.com
Michael Burry, the investor known for betting against the US housing market before the 2008 financial crisis, has sold his entire stake in Alibaba and moved the money into competitor JD.com.
In a Substack post, Burry wrote that he had recently shifted his Alibaba position into JD.com, increasing his stake in that rival Chinese e-commerce company. Initially, he said, he had planned to "move most of it back after a month or two," but added: "No longer."
Burry, who founded Scion Capital Management and was portrayed by Christian Bale in The Big Short, said Alibaba's share price would have to "fall by half" before he would consider buying again. His exit comes as Alibaba announced a major share sale to fund its artificial intelligence ambitions.
Alibaba's $10.2 billion offering
Alibaba said on Sunday it would raise about HK$80 billion ($10.2 billion) by selling 710 million new shares at HK$112.70 apiece, an 8.4% discount to Friday's closing price of HK$123. The company said it would use all net proceeds to expand its AI capabilities and infrastructure.
Burry was critical of the move. "I cannot bless share issuances," he wrote, predicting that Alibaba's return on invested capital would keep falling. His comments highlight a tension between the company's need for capital to fund AI expansion and the dilution that new shares bring to existing investors.
Burry had previously expressed admiration for Alibaba's technology, calling the company "impressive" and saying it was "making serious inroads" in the low-cost large language model race in the US. But that enthusiasm did not extend to the share sale.
Profit pressure from AI spending
Alibaba's recent financial results illustrate the costs of its AI push. Revenue rose 9% in the June quarter, but net profit plunged 75% as capital expenditure jumped 75% to nearly $10 billion. The spending mirrors a broader trend among big tech firms like Microsoft, Amazon, Alphabet, and Meta, which are investing heavily in AI infrastructure.
Investors have shown some alarm. Alibaba's US-listed shares fell about 9% on Friday to $119.34, and its Hong Kong shares dropped as much as 10% on Monday after the offering was announced. The company's American Depositary Receipts are down 18.6% for the year, and its Hong Kong-listed shares are down 13.9%.
Burry had disclosed in April that he built a new position in Alibaba. His exit marks a notable reversal, though his stated reason is not a loss of faith in the company's business but rather its capital-raising strategy.
Market reaction and outlook
The share sale is expected to be Hong Kong's largest follow-on offering by a company on record. Alibaba's stock has struggled despite enthusiasm about its AI potential, with its US-listed shares trading over 60% below their 2020 peak.
Burry's decision to sell underscores the debate over how Alibaba's AI investments will translate into returns. While the company sees AI as central to its future, some investors worry that the heavy spending may take years to pay off. Burry's position is clear: he's not willing to wait at the current price.