Burry Exits Alibaba, Calls It Overvalued Ahead of $10B Share Sale
Source: Fortune. Casualplayhub News adds summary, context, and editorial framing while linking back to the original report.
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Michael Burry, the hedge fund manager who famously bet against the US housing market before the 2008 financial crisis, has once again made a bold move in the Chinese tech sector. The founder of Scion Capital Management recently disclosed that he sold his entire position in Alibaba Group Holding Ltd., calling the stock overvalued. In a post on Substack, Burry revealed that he is now building a "large" position in JD.com, Alibaba's direct competitor in online retail. He said he had initially planned to rotate most of his capital back into Alibaba after a month or two, but that plan has changed. "No longer," he wrote, adding that Alibaba's share price would have to "fall by half for me to get interested again."
Burry's remarks come at a critical time for Alibaba. The company announced a massive share sale to raise approximately HK$80 billion, or $10.2 billion, to fund its artificial intelligence investments. This follow-on offering is set to be the largest of its kind in Hong Kong's history. Burry, known for his contrarian and value-oriented approach, expressed strong disapproval of the move. "I cannot bless share issuances," he stated, explaining that he expects the return on invested capital from Alibaba to continue declining.
The numbers support his skepticism. Alibaba reported a staggering 75% decline in profit for the quarter ending June, driven largely by increased capital spending on AI infrastructure. This has unnerved investors who are already wary of the Chinese tech sector's future returns. The company's American Depositary Receipts have fallen 18.6% year-to-date, and their Hong Kong-listed shares are down 13.9% in 2025. On Friday, the stock closed at HK$123 in Hong Kong, but the new offering was priced at a discount of HK$112.70 per share, reflecting the market's cautious sentiment.
Interestingly, Burry had only recently disclosed a new position in Alibaba back in April. His quick exit suggests a sharp reversal in his outlook. While he did not elaborate on the specifics of his JD.com investment, the shift underscores his belief that JD.com offers better value at current levels. JD.com has been focusing on cost efficiency and supply chain improvements, contrasting with Alibaba's heavy spending on AI.
The broader market reaction has been mixed. Some analysts view Burry's exit as a warning sign for Alibaba, while others argue that the company's AI investments could pay off long-term. However, the immediate pressure on the stock remains evident. The discount on the share sale also indicates that institutional investors are demanding a lower entry price amid uncertainty.
Burry's track record lends weight to his critiques. His prescient bet against subprime mortgages, immortalized in the book and film "The Big Short," made him a household name. More recently, he has made headlines for his bets on GameStop and other distressed assets. His current focus on JD.com may signal a new contrarian play in the Chinese e-commerce space.
As Alibaba navigates its AI transformation, the market will be watching closely. Whether Burry's move proves prophetic or premature remains to be seen, but his voice adds a definitive note of caution to the narrative surrounding the Chinese tech giant.
Article commentary
Michael Burry’s decision to exit Alibaba just months after building a position is a classic example of his contrarian, value-driven investment style. Known for his willingness to go against the herd, Burry’s move serves as a stark reminder that even the most prominent tech names can fall out of favor when fundamentals deteriorate. His criticism of Alibaba’s share issuance is particularly noteworthy. Dilution is a perennial concern for value investors, and Burry’s refusal to “bless” the offering signals that he views the capital raise as a sign of weakness rather than opportunity. The timing of his exit is also significant. Alibaba’s profit plunge of 75% in the June quarter, driven by aggressive AI spending, has raised eyebrows across the investment community. While many tech giants are pouring money into AI, the near-term returns are uncertain. Burry’s expectation that return on invested capital will continue declining suggests he sees a structural issue rather than a temporary setback. This contrasts with the bullish narrative that AI investments will eventually pay off handsomely. Burry’s pivot to JD.com is equally telling. JD.com has traditionally been seen as a more conservative player in the Chinese e-commerce arena, with a focus on logistics and efficiency rather than headline-grabbing AI projects. Burry may be betting that JD’s disciplined approach will yield better returns in a market where investors are growing impatient with high spending and low profits. His move also reflects a broader trend among value investors who are rotating away from high-growth, high-spend tech stocks toward more reasonably valued alternatives. The market reaction to Burry’s comments has been mixed. Alibaba’s stock has already been under pressure, and the discount on the Hong Kong share sale indicates that investors are not eager to buy at previous levels. However, some analysts argue that the company’s AI push could be transformative, and that Burry’s short-term view might miss the long-term potential. The tension between these perspectives is at the heart of the current debate over Chinese tech stocks. Burry’s track record demands attention, but it is not infallible. His bets on GameStop and other meme stocks were highly profitable, but he has also made mistimed moves. The Chinese tech sector is particularly volatile, influenced by regulatory shifts, geopolitical tensions, and domestic economic conditions. Burry’s analysis may be spot on regarding Alibaba’s current valuation, but the market could prove him wrong if sentiment shifts. From a broader perspective, Burry’s exit highlights the growing unease among sophisticated investors about the sustainability of AI-driven growth narratives. The massive capital outlays required for AI infrastructure are creating cash flow strains for many companies. Alibaba’s decision to raise $10 billion through a share sale, rather than using internal cash flow, underscores the scale of its investment needs. This could lead to further dilution and pressure on earnings per share, a concern that resonates with value-oriented investors. Ultimately, Burry’s move is a cautionary tale for investors who have been piling into Chinese tech stocks on the promise of AI. It underscores the importance of scrutinizing capital allocation and return on investment, especially when companies are spending heavily on unproven technologies. While the future of Alibaba’s AI strategy may still be bright, Burry’s willingness to cut his losses and rotate into a competitor suggests that patience is wearing thin. In the coming months, the market will likely continue to debate the merits of Alibaba’s AI investments versus its near-term financial performance. Burry’s voice adds a powerful counterpoint to the prevailing optimism, reminding investors that even the most dominant companies face risks when they stray from disciplined capital management.