The glory of the Internet giants is gone, and the A-share "Internet +" bubble may burst

Internet companies represented by Apple, Google, and Microsoft in the United States and BAT (Baidu, Alibaba, and Tencent) in China have been very successful in the past decade, setting off a wave of mobile Internet craze around the world, which reached its peak in 2015 during the "Internet+" craze on China's Growth Enterprise Market.
However, as the performance of Apple and BAT companies fell short of expectations and their stock prices continued to fall, the "Internet +" of China's ChiNext has lost its glory. It seems that the Internet boom has come to a crossroads again. All this also reminds people of the bursting of the dot-com bubble in 2000, when the Nasdaq plummeted from 5,000 points to just over 1,000 points.
Internet leaders collectively declined
Well-known tycoon Soros reduced his holdings in Alibaba and Baidu in the second quarter, and then increased his holdings in an ETF that tracks 50 Hong Kong-listed Chinese blue-chip stocks. Soros also bought more than 1.45 million shares of Time Warner for the first time, with a market value of US$259 million; and significantly increased his holdings in Facebook, increasing his holdings from about 124,000 shares to more than 2.59 million shares.
Documents submitted by Soros Fund Management show that in the three months ending June 30 this year, the fund's holdings of Alibaba shares dropped sharply from 4.39 million shares on March 31 to 59,300 shares, a reduction of 98.7%, and the market value of holdings decreased from US$370 million to US$4.9 million; the fund's holdings of Baidu shares dropped from 358,650 shares to 42,800 shares, a reduction of 88%; and the decline in Alibaba and Baidu's share prices in the third quarter also proved Soros' foresight. In addition, Tencent also declined with the decline of Hong Kong stocks.
As for US companies, Apple, Qualcomm, and Microsoft reported performance that was lower than expected and also saw declines, but Facebook and Amazon's performance was better than expected and their stock prices have performed relatively steadily recently.


Wen Tianna, an investor, told China Business News that Soros may have several reasons for reducing his holdings in Alibaba, such as the high valuations of Alibaba and Baidu. In addition, the mainland's regulations have strengthened supervision of Internet finance such as third-party payments, which may limit the development space of related companies. Wen Tianna believes that the decline in Apple's stock price is mainly due to the fact that the market response to its products, whether mobile phones or watches, is not as good as expected, which has an impact on the upstream and downstream industrial chains. On the other hand, it is also related to the depreciation of the RMB and the slowdown of the Chinese economy. Tencent's decline is also related to the Chinese economy. In addition, mainland regulations have imposed restrictions on Internet finance. In the past, the valuation of Internet stocks was high because the market expected that the companies would have good growth. In the absence of precedents in the market, many attractive stories were accepted by investors. However, when the concept cools down and the market returns to rationality, it depends on the performance.
Wang Sheng, a strategist at Shenwan Hongyuan Securities, told China Business News that innovative investment is similar to venture capital, with a success rate of less than one in ten. Since the stock market supports the real economy, which is reflected in emerging industries, moderate bubbles can support the development of emerging industries. However, the difficulty lies in the fact that moderate bubbles, driven by human nature, will inevitably become bigger bubbles.
Haitong Securities analyst Xun Yugen believes that as a breeding ground for American technological innovation companies, Nasdaq has cultivated a number of Internet giants since the 1990s, such as Apple, Google, Microsoft, Comcast, Cisco, Intel, etc. Today, these companies have become large-cap blue chips with a market value of over US$100 billion, which is obviously unfair when compared with small-cap companies such as the A-share ChiNext.
Will the dot-com bubble burst?
Since the beginning of this year, as the ChiNext Index has set new highs and then plummeted, many industry insiders have compared the trend of the A-share ChiNext to the Nasdaq bubble in the United States in 2000. In fact, various regulatory "black swan" events have occurred in some A-share "Internet +" leading companies, which are extremely similar to the situation in the United States 15 years ago.
A private equity person in Shenzhen told China Business News that comparing the Nasdaq back then and China's ChiNext today, the last year after the Nasdaq entered the bull market cycle, there was a "slow bull" consolidation period of about seven or eight months, and then a soaring period of nearly half a year, forming a major trend of "corner acceleration"; and the trend of the ChiNext from January to early June was very similar to the Nasdaq's trend from mid-October 1999 to March 2000; now that the ChiNext peaked and pulled back in early June, its rapid decline is also similar to that of the Nasdaq back then.
The person said that the bursting of the Nasdaq bubble was first caused by the Microsoft antitrust case. The Enron and WorldCom financial scandals severely hit market sentiment. After that, the performance of many Internet companies was not as good as market expectations, which further accelerated the market bottoming out. These events in 2000 are similar to various regulatory events that occurred in China in 2015. For example, third-party payment may be restricted by the central bank recently. Companies such as Dazhihui, Tonghuashun, and Hengsheng Electronics have been frequently investigated. Tonghuashun may even be suspended from listing. The future of Internet finance is uncertain.
Since 2014, many companies on the SME Board, GEM, BAT, and Apple and Google in the United States have continued to grow through mergers and acquisitions. In fact, in 2000, WorldCom and other American Internet companies used mergers and acquisitions to expand wildly, repeatedly performing the tricks of "small fish eat big fish" and "fast fish eat slow fish". WorldCom then rapidly developed into the second largest long-distance telephone company in the United States and the largest Internet provider in the world. These events have similarities. "After 2001, the Internet quickly became popular, and the user growth rate also declined. After the popularization of smartphones in 2015, the growth rate also declined significantly." The private equity person said.
Wang Sheng believes that after the stocks of Internet companies are overly sought after by the market, they will inevitably cause the market to fall. The decline in stocks of emerging industries now may not be due to any problems with the companies themselves, but because they have risen too much before. There are many reasons for bursting this bubble. In addition to logical destruction, there are also external reasons, such as the expectation of a Fed rate hike, which is a major external factor.
Wen Tianna believes that the dot-com stock bubble has not yet reached the point of bursting. At least the current market growth rate is higher than in 2000, and the innovation boom brought about by Apple, Google and BAT can also trigger market breakthroughs and revolutions. If the next wave of innovation fails to appear, future valuations will not be able to be maintained. Although it may not necessarily reach the point of bursting and plummeting, a reassessment of value will inevitably occur.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.