“Big Short” investor Michael Burry has moved his entire Alibaba position into rival Chinese e-commerce company JD.com, saying Alibaba’s latest share sale has made him unwilling to reinvest unless the stock falls dramatically.
Burry, who gained prominence for betting against the U.S. housing market ahead of the 2008 financial crisis and was portrayed by Christian Bale in “The Big Short,” disclosed the move in a Substack post on Sunday.
“I planned to move most of it back after a month or two. No longer,” Burry wrote, adding that Alibaba would have to “fall by half” before he would consider buying the stock again.
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His decision came after Alibaba announced plans to raise HK$80 billion, or about $10.2 billion, through the sale of 710 million new shares at HK$112.70 each. The price represented an 8.4% discount to Alibaba’s closing share price on Friday.
Alibaba said it would use all of the net proceeds to expand its artificial intelligence capabilities and infrastructure.
Burry objected to the decision to raise capital by issuing new shares, arguing that the transaction would dilute existing shareholders.
“I cannot bless share issuances,” he wrote, describing the move as another “new paradigm” for Alibaba and predicting that its return on invested capital would continue to decline.
The criticism comes from a growing tension surrounding Alibaba’s AI strategy. The company is investing heavily to compete in artificial intelligence, but the scale of that spending is putting pressure on near-term profitability and raising questions about whether the eventual returns will justify the capital being deployed.
Burry remains positive about Alibaba’s technology, even as he has become more negative on the stock.
He said the company was “making serious inroads” in the U.S. market for low-cost large language models and described Alibaba as an “impressive” disruptive force.
The contrast between his view of the technology and his decision to sell the stock is significant. Burry’s objection is focused less on Alibaba’s ability to compete in AI than on how management is financing that expansion and the returns shareholders may ultimately receive.
Alibaba’s latest financial results have reinforced those concerns.
Revenue increased 9% in the June quarter, but net profit plunged 75% as the company accelerated spending. Capital expenditure rose 75% to nearly $10 billion, highlighting the enormous cost of its AI and infrastructure push.
The spending places Alibaba within a much broader global AI investment cycle. Microsoft, Amazon, Alphabet and Meta are committing hundreds of billions of dollars to capital expenditure, much of it directed toward data centers, computing capacity and other AI infrastructure.
The central investment question is increasingly shifting from how much companies can spend on AI to how quickly that spending can generate revenue and profits.
That question matters to Alibaba too because the company is pursuing an AI strategy while competing in a difficult domestic market and operating under geopolitical and economic pressures.
Its U.S.-listed shares remain more than 60% below their 2020 peak. The stock has faced years of pressure from China’s technology crackdown, slower economic growth, intense competition in e-commerce and continuing geopolitical tensions between Beijing and Washington.
Alibaba shares fell 9% on Friday to $119.34 following its latest results. The pressure intensified in Hong Kong on Monday, with the stock falling as much as 10% after the company announced the new share offering.
The sharp market reaction suggests investors are concerned not only about the scale of Alibaba’s AI investment but also about the decision to finance part of that expansion through equity issuance at a discount.
For existing shareholders, issuing new shares increases the number of shares outstanding and can dilute their ownership percentage and claim on future earnings. The transaction therefore creates a trade-off: Alibaba gains $10.2 billion to accelerate its AI ambitions, but existing shareholders bear part of the financing cost through dilution.
Burry’s switch to JD.com signals where he currently sees better risk-reward among China’s major technology companies. Rather than abandoning Chinese technology altogether, he has moved capital from Alibaba into one of its largest domestic rivals.
His decision also underscores the distinction between being bullish on an industry’s technology and being bullish on a particular stock. Alibaba may be making progress in AI, but Burry’s argument is that technological progress alone does not guarantee attractive shareholder returns if investment requirements remain extremely high and returns on capital deteriorate.
The latest share sale could therefore become an important test for Alibaba’s AI strategy. If its investments produce strong growth and improve the company’s competitive position, the additional capital could ultimately create value. But if returns remain weak, shareholders could be left with a larger capital base generating insufficient returns.