Fu Peng: The Market Shifts from Rewarding Cash-Burning Expansion to Punishing Capital Consumption

Fu Peng pointed out that the current market is in a vacuum period of proving and disproving the AI business closed loop, with euphoric sentiment cooling down and the logic shifting from rewarding capital expenditure arms races to punishment. In this environment, the phenomenon of the U.S. stock market punishing Google's negative free cash flow and shifting towards Apple is quite typical, and similar situations have emerged among Chinese internet giants. Alibaba's capital expenditure surged significantly this quarter, leading to continuous net outflows of free cash flow. Due to the difficulty of forming a profit closed loop of comparable scale from AI computing power and infrastructure investments in the short term, high-intensity capital expenditures have consumed offshore cash, causing investors to have serious doubts about marginal capital returns. The global market is skeptical about the complete closed loop narrative of AI, and Alibaba has also announced a massive placement and convertible bond financing, leading to the dilution of existing shareholders' equity. The big short seller Michael Burry has reduced or even cleared his position in Alibaba, turning instead to heavily invest in or increase his stake in JD.com, which is similar to the logic of investors switching from Google to Apple. Those who maintain relatively restrained balance sheet expansion and do not consume free cash flow to catch up with the AI arms race will be viewed by the market as safe investment targets.

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