Fu Peng said the market is now in a vacuum period where the thesis of a complete and viable AI commercial loop has yet to be proven or disproven, and that shift is changing how investors price companies. In his view, the earlier enthusiasm that rewarded heavy spending in the AI arms race has cooled, giving way to a framework that penalizes aggressive capital consumption. He pointed to the U.S. market’s punishment of Alphabet after free cash flow turned negative and the rotation toward Apple as a clear example of that change, adding that a similar pattern is now playing out among major Chinese internet companies. Fu said Alibaba’s capital expenditures surged this quarter, leading to continued net free cash flow outflows. If large AI computing and infrastructure spending cannot quickly produce profits on a comparable scale, he argued, the burden falls on offshore cash and raises fresh doubts about marginal returns on capital. Against a market that is already unconvinced about a full AI profit loop, he said that announcing large placements or convertible bond financing amounts to further shareholder dilution. Fu also cited Michael Burry’s reduction or exit from Alibaba and heavier positioning in JD.com as reflecting the same investor preference for companies with more restrained balance-sheet expansion, less pressure on free cash flow, and clearer buyback execution.
Odaily reported that Fu Peng said the market is in a vacuum period for AI, where a complete and viable commercial loop has not yet been proven or disproven. In that setting, investor excitement has cooled, and the market’s logic has shifted from rewarding a capital-expenditure arms race to punishing it.
Fu said the earlier reaction in U.S. equities offered a clear example: the market penalized Google after free cash flow turned negative and rotated toward Apple instead. He said the same kind of shift is now showing up among China’s internet giants.
According to Fu, Alibaba’s capital expenditure, or CapEx, jumped sharply this quarter, pushing free cash flow, or FCF, into continued net outflows. When heavy spending on AI computing power and infrastructure cannot form a profit loop of comparable scale in the short term, that level of CapEx drains offshore cash. He said investors had already begun to seriously question marginal returns on capital.
He added that the global market is already only half-convinced by the narrative of a full AI commercial loop. In that context, announcing large placements or convertible bond financing means further dilution for existing shareholders.
Fu also pointed to bearish investor Michael Burry, saying his move to reduce or even fully exit Alibaba while building or increasing positions in JD.com follows the same logic as the switch from Google to Apple. In Fu’s view, the market now treats companies as safer when they keep balance-sheet expansion relatively restrained, avoid burning FCF to chase the AI arms race, do not keep raising fresh financing for that spending, and have buyback plans with higher execution certainty.
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