Michael Burry Sells Entire Alibaba Stake and Buys JD.com — What the Numbers Show
Key Takeaways
- •Michael Burry confirmed on X that he converted his Alibaba holdings into a larger JD.com position a few months ago and would only consider buying Alibaba again if the stock fell roughly 50%.
- •Alibaba's HK$80 billion (~$10.2 billion) share sale priced 710 million new shares at HK$112.70, an 8.4% discount, diluting existing holders by about 3.7%, and the stock fell nearly 10% on the news.
- •Alibaba trades at 25x trailing earnings with a negative free cash flow yield of 4.2%, whereas JD.com trades at 17.9x trailing earnings with a positive free cash flow yield of 10.7% and a 3.3% dividend yield.
- •Alibaba's net income fell from $17.83 billion to $15.35 billion despite 8% revenue growth, with return on invested capital dropping to 2.6%, while JD.com's earnings decline was attributed by analysts to food-delivery spending rather than weakness in its core business.
- •Analyst opinion is split on the trade: Morgan Stanley downgraded JD.com to Underweight with a $28 price target, Barclays flagged JD's dependence on subsidized electronics demand, and Alibaba's average price target implies roughly 58.5% upside.
Michael Burry, the investor famous for betting against the U.S. housing market before the 2008 financial crisis, has dumped his Alibaba shares and redirected the money into JD.com, Inc. (JD), building a larger position in the Chinese e-commerce rival.
Burry confirmed the move in a post on X, writing that he flipped his Alibaba stock into a large JD.com position a few months ago. He says he has no plans to go back to the stock.
His reason is direct. Alibaba announced a share sale worth HK$80 billion — roughly $10.2 billion — to fund AI infrastructure. Burry sees the offering as a sign that share issuance is now part of how Alibaba operates and funds itself going forward. The raise ranks among the largest follow-on share sales in Hong Kong in years, and it lands amid an AI infrastructure spending race in which China's biggest internet companies, mirroring the capex surge at U.S. hyperscalers, are pouring capital into cloud computing and AI data centers.
"Issuing shares is now its new paradigm," Burry wrote. He added that Alibaba would need to drop around 50% from current levels before he would consider buying the stock again.
That stance centers on the capital raise, which Burry views as evidence that shareholder dilution has become a recurring feature of Alibaba's funding strategy. Each new share issued spreads the same earnings across a larger base, so the cost of repeated offerings to existing holders compounds over time — the arithmetic behind his objection.
The Valuation Gap Between the Two Stocks
The valuation and cash flow figures behind the trade lay out a stark contrast between the two companies. Alibaba trades at 25x trailing earnings and posts a negative free cash flow yield of 4.2%, meaning the business is currently consuming rather than generating cash. JD.com trades at 17.9x trailing earnings and 8.3x forward earnings, with a positive free cash flow yield of 10.7%.
The income profiles diverge as well: JD.com carries a 3.3% dividend yield, compared with a 0.9% yield at Alibaba. Looking at analyst fair value models, JD.com shows around 49.6% upside to fair value, against 19.9% for Alibaba.
The share sale itself priced 710 million new Alibaba shares at HK$112.70 each, an 8.4% discount to the prior close. The placement increases the share count by about 3.7%, diluting existing holders by that amount — the number at the center of Burry's criticism. Alibaba shares fell nearly 10% on the news.
Recent results underscore the gap in cash generation. Alibaba's net income fell from $17.83 billion to $15.35 billion even as revenue grew 8%, and its return on invested capital has dropped to just 2.6%. JD.com also saw net income decline, from $5.67 billion to $2.81 billion, but analysts say the drop reflects spending on new ventures such as food delivery rather than a problem in the core business. JD pushed into food delivery in 2025, taking on Meituan and Alibaba's Ele.me in a subsidy-heavy contest for customers — spending that has weighed on its margins even as it defends the core retail business.
Risks on Both Sides
Not everyone agrees with Burry's rotation. Morgan Stanley has downgraded JD.com to Underweight and set a $28 price target, a level that sits below where the stock is currently trading.
Analysts at Barclays have flagged a concentration risk on the JD.com side: the company relies heavily on electronics and home appliances, categories that could weaken as government trade-in subsidies wind down. Those subsidies, which Beijing expanded in 2025 to cover smartphones and other consumer electronics, have propped up demand in precisely the categories JD leans on most.
On the Alibaba side of the trade, the analyst consensus is actually positive. The average price target implies around 58.5% upside, and one fair value model puts the stock at $143.11 per share, roughly 20% above current levels.
Taken together, the swap amounts to a classic value rotation — selling a cash-consuming stock that trades at a higher multiple and replacing it with a cash-generating business available at a lower price. The signposts that will test both sides of it are concrete: whether Alibaba returns to the equity market for more capital, whether its AI buildout starts producing the cash flow to fund itself, and how JD's margins behave as food-delivery subsidies and the government trade-in program fade.
