Michael Burry rolled back on some of his investments in Chinese tech stocks just before DeepSeek’s breakthrough in artificial intelligence reignited a $1.3 trillion rally in the country’s shares.
The hedge fund manager, famous for his 2008 bet against the US housing market, trimmed his exposure in JD.com and Alibaba Group Holding Ltd. as of the end of last year, according to 13F regulatory filings on Friday.
Scion Asset Management, Burry’s investment firm, cut its holdings of JD.com by 40% to 300,000 shares during the fourth quarter. Its stake in Alibaba also decreased by 25% during the same period. Despite this reallocation, JD.com and Alibaba, together with Baidu Inc., were still a part of Scion’s top holdings.
The moves came amid a volatile stretch for Chinese stocks, when investors showed signs of wavering commitment after Beijing rolled out a stimulus blitz in late September. The government’s efforts sparked a frenetic rally into early October, but the momentum faded in the following months amid disappointment over the scale of fiscal stimulus, a weak economic outlook and a property crisis. Alibaba’s US-listed shares fell 20% in the fourth quarter, while JD.com declined 13%.
Scion didn’t cut its stake in all of its China investments. It started a new position on PDD Holdings Inc., a rival of Alibaba in China’s e-commerce sector, with 75,000 shares. The firm’s holdings in Baidu Inc. remained unchanged.
This investment was worth $40.9 million as of Dec. 31, representing 53% of Scion’s total equity holdings, data show. That was a reduction from about 65% in the previous three months.
The bearish options bought by Scion in the third quarter that would provide downside protection were longer in place as of Dec. 31, according to the filing.
China’s market has been on a stronger footing to start the year, with some of equity benchmarks outperforming US and European peers. That’s in part because of China’s growing clout in artificial-intelligence, on the back of the success of DeepSeek’s AI model.
As a result, investors have been re-evaluating the nation’s beaten-down shares, although they’re also assessing the impact of US President Donald Trump’s move to slap 10% tariffs on China. Its equity market has added more than $1.3 trillion in total value in just the past month amid such reallocations. The MSCI China Index is on track to outperform its Indian counterpart for a third-straight month, the longest such streak in two years. Shares of Alibaba and JD.com have gained 47% and 19% respectively this year, while those of PDD and Baidu climbed 28% and 16%.
Burry has been one of the few prominent China stock bulls among hedge fund investors, along with Appaloosa Management’s David Tepper, even before Beijing’s major policy shift in September. The latter, a billionaire investor, ramped up his stake in China-related stocks and exchange-traded funds last quarter.