One Micron Can Buy Virtually the Entire Chinese Internet Sector
What’s Behind the Giants' Bizarre Cash-Burn?
In our previous article, we highlighted key signals indicating that the destructive, heavy-subsidy food delivery wars among China’s internet platforms were finally drawing to a close (see Is the Delivery War Drawing to an End?). However, as noted in our latest monthly views of Chinese equities, China’s internet giants are continuing to burn massive amounts of cash, but the ultimate strategic implications remain unclear to the public market.
Baiguan Pro features short and timely commentaries on important market anomalies and events that are worth your attention. Today, our team’s Aaron breaks down this cash-burning and outlines why these cash cows might be intentionally understating their true profitability.
One Micron Can Buy Virtually the Entire Chinese Internet Sector
What’s Behind the Giants’ Bizarre Cash-Burn?
Let’s log this historic milestone: Micron’s market cap now roughly equals Tencent+Alibaba+JD+ Meituan+Pinduoduo + Kuaishou combined.
This year, Chinese internet stocks have been trapped in extreme pessimism. With Q1 earnings wrapped up, market sentiment has hit a freezing point. The contrast over the past month is jarring: US semiconductor stocks are skyrocketing, while US-listed Chinese tech giants continue to plunge.
Michael Burry’s bullish call on Chinese assets about a month ago seems to have been a bit premature.
Capital markets have priced Chinese big tech into complete distortion. The fact that a single memory chip maker like Micron (MU) is worth nearly the entire cohort of China’s digital pioneers is mind-boggling. These are massive commercial empires, yet combined, they equal just one US hardware player.
Today, I’m not here to critique Burry or dissect Q1 prints. Instead, I want to highlight a glaring anomaly
——Chinese tech giants are aggressively burning cash on puzzling initiatives. Their explanations often sound like mere excuses to spend money, yielding zero visible returns.
US Tech Giants: Capital Expenditures (CapEx) are hitting historic highs, but management presents a clear underlying logic and a visible roadmap for expected ROI.
Chinese Tech Giants: Their cash-burn feels literal—like setting capital on fire. It vanishes instantly, leaving investors completely in the dark.
If only one company did this, you could blame bad strategy. But when virtually every industry leader does it simultaneously, can we simply write it off as “industry competition”?
In a near-zero-growth sector like e-commerce, the marginal utility of destructive hyper-competition is rock-bottom. Furthermore, there is a clear secular growth driver available—Artificial Intelligence (AI). There is no logical reason to keep cannibalizing each other in legacy businesses.
If a public market investor sitting behind a monitor can figure this out, are we to believe these elite management teams are completely oblivious?