Michael Burry has swapped his entire Alibaba (BABA) stake for a large JD.com (JD) position, arguing that Alibaba’s shift toward repeated share issuance has changed the investment case. The investor disclosed on X that he converted his Alibaba holding into JD.com several months ago and has no plans to switch back. He described share issuance as Alibaba’s “new paradigm” and said the stock would need to fall roughly 50% from current levels before he would consider buying again.
The immediate trigger was Alibaba’s weekend announcement of an HK$80 billion, or roughly $10.2 billion, share sale to fund full-stack AI capabilities. The placement was priced at HK$112.70 per share, an 8.4% discount to the previous close, and will increase the share count by about 3.7%. Alibaba’s Hong Kong-listed shares fell 9.67% after the news.
The valuation contrast between the two Chinese e-commerce companies is stark. Alibaba trades at 25.0 times trailing earnings with a negative 4.2% free cash flow yield. JD.com trades at 17.9 times trailing earnings and 8.3 times forward earnings, with a 10.7% free cash flow yield and a 3.3% dividend yield. On multiple measures, JD.com is cheaper and generates positive free cash flow, while Alibaba is currently cash-flow negative.
The earnings profiles tell different stories. Alibaba’s latest quarterly net profit fell about 75% year over year, and return on invested capital has dropped to 2.6%, as AI infrastructure spending continues to squeeze margins. JD.com’s profit decline stems mainly from investments in food delivery and new ventures; its core retail business still produces record margins. A 10.7% free cash flow yield suggests the market is pricing JD.com as a cash-generating operation.
The case for following Burry’s rotation is straightforward. JD.com’s 8.3 times forward earnings and 3.3% dividend yield, combined with $187 billion in revenue and an established logistics network, imply that the stock is priced for almost no growth. Analyst consensus targets point to 33.2% upside, and InvestingPro’s fair value model sets a target of $43.94, implying 49.6% upside. For Alibaba, the HK$80 billion placement is not a one-off event but the beginning of a multi-year AI capital expenditure cycle that Burry views as a drag on returns.
Still, directly copying the trade carries risks. Barclays’ SWOT analysis flags JD.com’s heavy reliance on electronics and home appliances, categories that could weaken as government trade-in subsidies wind down. Morgan Stanley has downgraded JD.com to underweight with a $28 target, below the current price. On the Alibaba side, analyst consensus targets imply 58.5% upside, suggesting the market may be over-penalizing the share sale.
Overall, Burry’s move represents a value rotation: selling an expensive, cash-burning growth asset and buying a cheaper, cash-generating one. Ordinary investors, however, should weigh JD.com’s subsidy and margin pressures against Alibaba’s long-dated AI optionality rather than follow blindly.
