Alibaba’s $10.2 Billion AI Bet Sends Burry Toward JD.com

Alibaba’s $10.2 Billion AI Bet Sends Burry Toward JD.com
Alibaba is asking investors to finance a larger AI push just as one of Wall Street’s best-known skeptics is walking away. The $10.2 billion share placement has turned a bet on China’s AI race into a fresh argument over cost, dilution and returns.

The company announced plans to raise about HK$80 billion through a share sale, funding investments as Chinese technology groups expand their AI ambitions. The deal is set to be Hong Kong’s largest recorded follow-on offering by a company, putting Alibaba’s capital needs squarely in front of shareholders.

Michael Burry, the Scion Capital founder known for his pre-2008 housing-market bet, said the announcement helped cement his decision to sell Alibaba after building a position only months earlier. He said he had intended to return to the stock after a short interval, but that plan changed: “I planned to move most of it back after a month or two. No longer.”

Burry’s objection is not simply to Alibaba’s valuation. “I cannot bless share issuances,” he said, arguing that the company’s return on invested capital will keep declining. He added that the shares would need to “fall by half for me to get interested again.”

The timing has reinforced his case. Alibaba reported a 75% drop in profit for the June quarter while stepping up AI-related capital expenditure, a trade-off that has unsettled investors looking for evidence that heavier spending will eventually produce stronger returns. Its US-listed shares were down 18.6% for the year and fell 8.6% on Friday; the Hong Kong listing was down 13.9%.

Alibaba priced the placement at HK$112.70 a share, below Friday’s HK$123 close. Burry, meanwhile, said he was building a “large” position in JD.com—placing a rival e-commerce name at the center of his wager that Alibaba’s AI spending has become too expensive for shareholders.

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