America’s biggest investor Michael Burry dumps Alibaba, buys rival in China

Renowned investor Michael Burry has recently divested his entire stake in Alibaba and redirected the funds into rival Chinese e-commerce firm JD.com, according to a recent Substack post. The former pioneer of the 2008 housing crisis prediction, Burry, had initially intended to gradually repurchase the Alibaba shares but has since changed his mind. He believes that Alibaba's stock would need to depreciate by half before he would consider reinvesting.

In an effort to bolster its AI capabilities, Alibaba has announced plans to raise HK$80 billion ($10.2 billion) by selling 710 million new shares at a discounted rate of 8.4% below their previous closing price. The company intends to utilize this capital to expand its AI infrastructure and capabilities. While acknowledging Alibaba's strides in the low-cost large language model race and praising its technology as "impressive," Burry has expressed reservations about the share issuance. He contends that "I cannot bless share issuances."

Alibaba's latest financial results for the June quarter reflect a revenue increase of 9%, but a significant decline in net profit by 75% due to escalating capital expenditure, which surged by 75% to nearly $10 billion. This spending can be attributed to the ongoing AI arms race among global technology giants, such as Microsoft, Amazon, Alphabet, and Meta.

However, despite its AI ambitions, Alibaba's shares have fallen more than 60% below their 2020 peak, influenced by Beijing's tech crackdown, sluggish economic growth, and intense competition in the market.

Burry has also been critical of two other technology behemoths, Oracle and Micron Technology, recently expressing his discontent with both companies. He has taken a short position against Oracle, citing the corporation's heavy investment in AI infrastructure, including long-term leases and GPU capacity contracts exceeding its current revenue base.

Despite strong operating cash flow, Oracle reported negative free cash flow due to soaring capital expenditures. Burry warns that a downturn in AI demand could leave Oracle with costly obligations and reduced returns.

Similarly, Burry has expanded his short bet against Micron Technology, attributing the recent rally in the chipmaker's stock price to investor enthusiasm for AI rather than solid fundamentals. Micron has experienced cyclical downturns in the past, and Burry posits that its profitability remains susceptible to fluctuations despite the present boom.