Big Short Investor Michael Burry Reduced Stake in Chinese Tech Giants Before £1T DeepSeek Rally

Scion Asset Management founder Michael Burry is famous for betting against the US housing market during the 2008 financial crisis, which netted him £556 million in profits. His contrarian trading approach was chronicled in the award-winning film Big Short.

According to the latest Form 13F filed with the US Securities and Exchange Commission on 14th February, Burry's Scion Asset Management trimmed its stake in several Chinese tech stocks in Q4 2024, just before DeepSeek AI triggered a £1.03 trillion stock market rally in the mainland.

Burry Trims Stake In Alibaba, JD.com

The hedge fund manager significantly reduced his exposure to JD.com and Alibaba Group Holdings in Q4.

Scion Asset Management reduced its stake in JD.com by 40% to 300,000 shares worth £8.26 million. During the same period, the hedge fund's stake in Alibaba also dropped by 25% to 150,000 shares, which is now worth £10.1 million. However, both these stocks remain among the top holdings in Burry's portfolio.

The trades came amid a volatile stretch for Chinese stocks due to mixed investor commitment after China rolled out aggressive monetary stimulus measures in September 2024. Beijing's efforts sparked a rally in early October, but the momentum waned in the following months due to a weak economic outlook and the ongoing property crisis. During that period, Alibaba's US-listed shares tanked by 20% while JD.com's stock price declined by 13%.

Despite the stake cuts in Chinese companies, Burry opened a new position in PDD Holdings, buying 75,000 shares in Q4 for £5.77 million. Furthermore, the hedge fund's stake in Baidu Inc. remained unchanged.

Investors Reassess China Stocks Amid AI Rally And Trump's Tariffs

The cost-effective DeepSeek AI model rollout last month triggered a massive rally in the mainland. At the same time, US equities were in limbo as investors questioned the narrative that top AI companies require billions of dollars in capital to develop next-gen AI models.

Some of China's equity benchmarks outperformed US and European peers as shares of Alibaba and JD.com jumped 47% and 19%, respectively, year-to-date. PDD and Baidu stock prices also gained 28% and 16%, respectively, this year.

The latest developments have prompted investors to reevaluate Chinese stocks, which have experienced volatility over the years. Investors are also assessing the impact of US President Donald Trump's tariffs on China.

Burry is among the few prominent hedge fund managers, like Appaloosa Management's David Tepper, who have been bullish on China stocks.

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