Alibaba's Cloud Ambitions and Burry's Calculated Gamble: Unlocking the Upside in a Volatile Market

In an era of geopolitical tension and regulatory uncertainty, Michael Burry’s portfolio adjustments in 2025 reveal a contrarian bet on Chinese tech giants—most notably Alibaba Group Holding (BABA). Despite trimming his stake by 25%, Alibaba remains Scion Asset Management’s largest holding, accounting for 16.43% of the portfolio. This strategic recalibration underscores a nuanced calculus: Burry sees long-term value in Alibaba’s cloud and AI capabilities, even as short-term risks linger.

The Alibaba Stake: A Reduction Rooted in Conviction

Burry’s partial sale of Alibaba—reducing holdings from 200,000 to 150,000 shares—suggests neither capitulation nor complacency. The move reflects caution amid U.S.-China trade frictions and Beijing’s tightening grip on tech monopolies. Yet the remaining $12.7 million stake signals unwavering faith in Alibaba’s cloud computing segment, which now powers 90,000 spin-off AI models and serves 290,000 API users via its Qwen platform. This growth engine, paired with Barclays’ $180 price target (implying a 32.9% upside from current levels), justifies the holding’s prominence.

The Cloud and AI Pivot: Alibaba’s Lifeline

Alibaba’s cloud business, a focal point for Burry’s optimism, now accounts for 20% of its revenue. The Qwen ecosystem, which includes language models and industry-specific solutions, is rapidly expanding. Analysts at Barclays argue this transition to AI-driven services could unlock $160 billion in enterprise value by 2026—far exceeding its current $317 billion market cap. Meanwhile, the disconnect between Alibaba’s DCF valuation of $49.47 and its trading price near $85 highlights a valuation puzzle. Critics cite overestimation of discount rates in traditional models, which fail to account for AI’s exponential growth potential.

Navigating Headwinds: Healthcare and Diversification

To mitigate sector concentration risks, Burry has rebalanced into healthcare (e.g., HCA Healthcare and Oscar Health) and consumer staples (Estee Lauder, V.F. Corp.). These defensive plays, alongside a new stake in Pinduoduo—a $54 billion revenue e-commerce disruptor—signal a portfolio designed for volatility. Pinduoduo’s PE ratio of 12.16 and $43.97 billion net cash position make it a compelling counterweight to Alibaba’s regulatory headwinds.

The Case for Upside: Data-Driven Optimism

Burry’s Alibaba bet hinges on three pillars:
1. AI Dominance: Qwen’s user growth and enterprise adoption could accelerate revenue diversification.
2. Analyst Backing: The stock’s 32.9% upside potential is supported by 107 hedge funds and a consensus $164 price target.
3. Valuation Disparity: Even at $85, Alibaba trades at a 44% discount to Barclays’ target—a gap Burry may believe will narrow as AI monetization accelerates.

Conclusion: A Long Game Worthy of a Contrarian

Burry’s Alibaba stake is a masterclass in selective opportunism. While trimming exposure to reduce risk, he retains a position in a company with $53 billion in cloud revenue (by 2026 estimates) and a valuation gap large enough to justify patience. The $180 price target—if achieved—would reward investors with a 112% gain from its 2024 lows.

Yet the true test lies in Alibaba’s ability to convert AI promise into profit. With 290,000 API users and a $43.97 billion cash war chest, Pinduoduo’s addition to the portfolio reinforces a strategy of balancing growth with defensive stability. In a market where fear overshadows fundamentals, Burry’s focus on intrinsic value—and his willingness to bet on tech’s next frontier—offers a blueprint for navigating uncertainty.

For now, Alibaba’s cloud ambitions remain the linchpin of this gamble. If Qwen’s scalability lives up to expectations, Burry’s 16% stake could prove a masterstroke.