The Big Short Investors New Strategy

Michael Burry's Betting Big on Alibaba and Chinese Tech Stocks

The Big Short Investor's New Strategy

Michael Burry, the investor who famously predicted the 2008 financial crisis, is now betting big on Chinese tech stocks.

Burry's investment firm, Scion Asset Management, disclosed in a regulatory filing that it had taken large positions in Alibaba Group Holding Ltd. and Tencent Holdings Ltd., two of China's largest tech companies. Scion also reported smaller holdings in other Chinese tech companies, including JD.com Inc. and Baidu Inc.

Burry's move into Chinese tech stocks is a significant change of strategy for the investor, who has traditionally focused on value stocks and short-selling overvalued companies.

Why is Burry Betting on China?

There are several reasons why Burry may be betting on Chinese tech stocks.

• China's tech sector is growing rapidly. The country's e-commerce market is the largest in the world, and its internet penetration rate is growing rapidly. This growth is expected to continue in the coming years, providing a tailwind for Chinese tech companies.
• Chinese tech companies are undervalued. Many Chinese tech stocks are trading at a discount to their Western counterparts, despite having similar growth prospects. This undervaluation may provide an opportunity for investors to buy into these companies at a relatively low price.
• Burry may be betting on a change in US-China relations. The Biden administration has taken a less confrontational approach to China than the Trump administration. This could lead to a thaw in relations between the two countries, which would benefit Chinese companies.

Is Burry's Bet a Good One?

Only time will tell whether Burry's bet on Chinese tech stocks will be successful.

However, there are several risks associated with investing in Chinese companies.

• China's economy is slowing down. The country's GDP growth rate has been declining in recent years, and this slowdown could hurt the growth of Chinese tech companies.
• Chinese tech companies are subject to government regulation. The Chinese government has a history of cracking down on tech companies, and this could lead to unexpected losses for investors.
• There is political risk associated with investing in Chinese companies. The US-China relationship is complex and could deteriorate in the future. This could lead to sanctions or other penalties against Chinese companies.

Despite these risks, Burry's bet on Chinese tech stocks could be successful if the Chinese economy continues to grow, the US-China relationship improves, and the Chinese government refrains from cracking down on tech companies.