Michael Burry sold his Alibaba position and vowed not to buy it back unless shares fall 50% from current levels. One day later, Alibaba's CEO put $15.3 million of their own money into the stock, Seeking Alpha reported.
That is the entire Alibaba story in two sentences. And figuring out which side to be on is one of the more interesting debates in AI right now.
On Sunday, Aug. 23, Alibaba announced it would raise HK$80 billion. That's approximately $10.2 billion, through a Hong Kong share placement to fund its artificial intelligence buildout.
The offering is Hong Kong's largest-ever follow-on offering. By the next day, Aug. 24, the Hong Kong-listed shares had fallen 8.5%, with an intraday decline of up to 10%. U.S. ADRs dipped to around $118.
The offering was priced at an 8.4% discount to the prior closing price, creating dilution, according to TheStreet.
Chairman Joseph Tsai purchased 720,000 shares at an average of $14.29, worth approximately $10.3 million. CEO Eddie Wu bought 350,000 shares at $14.24, valued at roughly $5 million.
I have covered Burry's Alibaba moves multiple times. My colleague at TheStreet continues to note that his relationship with the stock has been a series of reversals.
Burry built it into his largest holding in 2024, liquidated the whole position in Q1 2025, reversed again in April with a new stake, and then switched the entire Alibaba position into JD.com.
"Issuing shares is now its new paradigm," Burry wrote on X (formerly Twitter), giving his reason for the final exit. He said Alibaba shares would need to fall roughly 50% before he would consider buying again.
The timing worked in his favor almost immediately this time. Alibaba confirmed the $10.2 billion placement within weeks of Burry's exit, and the 8.5% single-day decline validated his dilution concern in real time.
This is actually not the first time Burry's exits have looked prescient in hindsight. The man reads balance-sheet shifts faster than most.
Related: After Burry ditched Alibaba for JD, Alibaba proved his point
His core concern is that the AI buildout fundamentally transforms what Alibaba is.
It was a capital-light e-commerce marketplace printing extraordinary returns. It is becoming an AI infrastructure company that requires heavy capital for each incremental dollar of revenue.
BABA's AI infrastructure offers a small percentage of pre-tax return after operating expenses, Reuters reports. At the same time, free cash flow is turning negative, and capital expenditure expectations are doubling by fiscal 2029.
Here is something a little complicated, because the underlying Alibaba business is not weak.
Revenue for the quarter ended June 30, 2026, was approximately $39.6 billion, up 9% year over year, according to the company's quarterly results.
Cloud revenue growth accelerated to 45%. AI-related product revenue delivered triple-digit growth for the twelfth consecutive quarter. Cloud adjusted EBITDA margin reached 12%, improving from the prior year.
Related: Alibaba's $10.2 billion AI bet could reach far beyond investors
"Alibaba Cloud's external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the twelfth consecutive quarter," said CEO Eddie Wu in the quarterly release.
CFO Toby Xu added that "AI monetization ramps up" and the company has "greater strategic and financial flexibility to make disciplined and sustained investments."
I think this is the bull case Tsai and Wu are personally backing with $15.3 million. Twelve consecutive quarters of triple-digit AI revenue growth are not just a narrative. Or luck.
It is a track record. But there's a problem. The question now is whether the capital required to sustain it destroys the shareholder return profile faster than the revenue growth creates value.
My honest answer is that both Burry and Tsai can have defensible positions simultaneously.
Burry is right that the offering creates real dilution and signals a business-model shift away from the buyback-driven shareholder return thesis that made Alibaba attractive in 2024 and 2025. The dilution from a single capital raise is not trivial.
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Tsai and Wu are right that Alibaba is executing at the center of China's AI infrastructure buildout with accelerating cloud revenue, improving margins, and a product portfolio that is generating real commercial demand.
The third point worth noting is that the $10.2 billion offering ranks third-largest globally this year, behind only Alphabet and Intel, according to a BigGo Finance report. When Alibaba needs to raise capital at that scale, it signals that the AI infrastructure race is capital-intensive everywhere, not just in the U.S.
BABA is down 18.87% year to date and 2.75% over the past year, according to Yahoo Finance. BABA has been a frustrating hold through a year of AI enthusiasm that rewarded U.S. semiconductors and infrastructure names while leaving Chinese tech underperforming.
Also Read: History of Alibaba: Timeline and Facts
You're probably wondering whether the chairman and CEO buying $15.3 million in the same week Burry exits marks a bottom. They could be defending their own stock narrative as insiders. Maybe they see something the market doesn't. Or maybe it means nothing at all. That's the question we are all sitting with now.
The 5-year return of -26.68% makes it clear that Alibaba's promise has outrun its delivery more than once. Now, I think this AI buildout is either the chapter where that changes or just the next version of the same story.
Related: Michael Burry says Nvidia rival is quietly getting serious
This story was originally published by TheStreet on Aug 25, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.