Why Institutional Investors Are Shifting from JD.com to Alibaba and What It Means for E-Commerce Exposure

Institutional investors are increasingly reallocating capital from JD.com (JD) to Alibaba (BABA), signaling a strategic pivot toward integrated, diversified tech platforms in China's e-commerce sector. This shift, exemplified by XY Capital's complete exit from JD.com in November 2025, reflects broader market dynamics favoring companies with robust AI and cloud infrastructure, even at the expense of short-term profitability. As Chinese e-commerce matures, the institutional preference for platforms with scalable, cross-sector ecosystems is reshaping exposure strategies for global investors.

The Catalyst: XY Capital's Exit and Alibaba's Outperformance

XY Capital Ltd., a fund with $189.92 million in 13F reportable U.S. equity assets, sold its entire 419,251-share JD.com position for $13.68 million in November 2025, effectively closing a stake that had once accounted for 9.4% of its assets under management. This move aligns with Alibaba's recent outperformance: the e-commerce giant's stock surged 94.4% year-to-date through December 2025, compared to JD.com's 7.6% decline. Alibaba's market capitalization, valued at $330–363 billion as of December 2025, dwarfs JD.com's $41.5–43.2 billion market cap, underscoring a stark institutional reallocation.

The divergence stems from contrasting strategic priorities. Alibaba has committed ¥380 billion ($53.5 billion) over three years to AI and cloud infrastructure, betting on the $1.8 trillion global AI market by 2030. Its cloud division, for instance, grew revenue by 34% year-over-year in Q3 2025, driven by AI-driven services. In contrast, JD.com's disciplined focus on operational efficiency-while yielding 13 consecutive quarters of gross margin expansion-has not offset the drag from high-risk ventures like food delivery and Jingxi, which contributed to a 1.05 billion yuan net loss in one quarter.

Revenue Diversification and Competitive Positioning

Alibaba's diversified revenue streams highlight its appeal to institutional investors. Its China E-Commerce segment generated ¥565 billion in 2026 revenue projections, while Cloud Intelligence is expected to contribute 14% of total revenue, up from 10% in 2025. The company's AI investments, including the Qwen large language model and Taobao Instant Commerce, are driving user engagement and software service take rates. Meanwhile, JD.com's revenue breakdown reveals a heavier reliance on its core retail business (¥250.58 billion in Q3 2025) and underperforming new ventures, which saw a -100.9% operating margin.

Alibaba's aggressive AI and cloud bets, though costly, position it as a leader in the next phase of e-commerce: AI-driven personalization, logistics automation, and cross-platform data integration. JD.com, by contrast, has prioritized margin stability and global expansion e.g., its CECONOMY acquisition for European retail access but lacks Alibaba's ecosystem-wide innovation.

Broader Institutional Trends: The Rise of Integrated Platforms

The shift toward Alibaba mirrors broader institutional trends favoring integrated tech platforms. In 2025, Chinese AI investment reached ¥890 billion ($125 billion), with Alibaba and Tencent leading corporate R&D spending. Institutional investors are increasingly valuing companies that balance innovation with regulatory adaptability. Alibaba's stabilization post-regulatory scrutiny and its cloud growth-now 34% year-over-year-have restored confidence, while JD.com's valuation discount forward P/E of 9.15X vs. Alibaba's 19.21X reflects skepticism about its long-term differentiation.

Moreover, the e-commerce sector's competitive landscape is intensifying. PDD Holdings' rise via ultra-low pricing and social commerce has fragmented market share, but Alibaba's scale and AI-driven logistics offer a moat that smaller players lack. JD.com's global ambitions, while strategic, face headwinds in markets where Alibaba's supply chain and cloud infrastructure already dominate.

Implications for E-Commerce Exposure

For investors, the reallocation from JD.com to Alibaba underscores a key takeaway: exposure to China's e-commerce sector must now prioritize platforms with diversified, AI-enhanced ecosystems. Alibaba's forward-looking investments in cloud, AI, and logistics align with global tech trends, while JD.com's operational discipline, though commendable, may not suffice in an era demanding rapid innovation.

However, risks remain. Alibaba's near-term profitability is clouded by its ¥67 billion AI R&D spend, and regulatory pressures could resurface. JD.com's disciplined capital allocation and global expansion, meanwhile, offer a counterpoint to Alibaba's aggressive bets. Yet, the institutional shift suggests that, for now, investors are willing to trade short-term margin stability for long-term ecosystem dominance.

Conclusion

The exodus from JD.com to Alibaba reflects a strategic recalibration in Chinese e-commerce investing. As institutional capital flows toward integrated platforms with AI and cloud capabilities, Alibaba's ecosystem-centric approach is redefining the sector's value proposition. For investors, this trend highlights the importance of aligning with companies that not only adapt to market shifts but actively shape them-positioning themselves at the forefront of the AI-driven e-commerce revolution.