Investing.com -- Michael Burry, the investor known for his bet against the U.S. housing market ahead of the 2008 financial crisis, has exited his position in Alibaba Group Holding Ltd. and shifted into rival Chinese e-commerce company JD.com Inc., saying Alibaba's shares have become too expensive.
Burry said he had initially planned to move most of his Alibaba investment back into the company after one or two months but changed his mind after reassessing the stock's valuation and outlook.
"I cannot bless share issuances," Burry said in a post on Substack, referring to Alibaba's plan to raise about HK$80 billion ($10.2 billion) through a share sale to finance investments in artificial intelligence. He said Alibaba's return on invested capital was likely to continue declining and that its shares would need to fall by about half before he would consider buying them again.
The comments come after Alibaba announced plans for what would be Hong Kong's largest follow-on share offering by a company, underscoring the scale of its push into AI. The company said on Sunday it had priced the offering at HK$112.70 a share, a discount to Friday's Hong Kong closing price of HK$123.
Alibaba's latest quarterly results have also raised concerns about the returns from its AI spending. The company reported a 75% decline in profit for the quarter ended in June as it stepped up investment in AI, even as revenue increased 9%.
The results and planned capital raising have added to investor concerns over whether Alibaba can generate sufficient returns from its heavy investment in AI and cloud infrastructure.
Alibaba's U.S.-listed American depositary receipts have fallen 18.6% this year, including an 8.6% drop on Friday. Its Hong Kong-listed shares are down 13.9% so far this year.
Burry disclosed in April that he had built a new position in Alibaba. He has now shifted that capital toward JD.com, describing the position in the online retailer as "large" while abandoning plans to return to Alibaba in the near term.
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