老登股估值大潰敗，一代資產的估值座標系之死

Original Author: Xiao Bing

On September 19, 2014, Alibaba was listed on the New York Stock Exchange, closing at $93.89 on its first day. That day, Alibaba's market cap reached $231 billion, surpassing the combined value of Oracle and Intel.

On June 25, 2026, Alibaba closed at $95.07.

Between these two numbers lies a full twelve years.

At the same time, Meituan closed at HK$65.45, dipping below its 2018 IPO price of HK$69.

Pinduoduo hovered around $79, returning to its June 2020 level.

Tencent's P/E ratio compressed to 12 times, nearly halved from its ten-year historical average of 25.7 times.

As for the younger Chinese internet companies, Bilibili fell from a high of $156 to $18, a decline of 89%; Kuaishou dropped from its IPO first-day high of HK$417 to HK$44, evaporating nearly 90% of its market value; iQiyi, Zhihu, Douyu, Huya – each saw drawdowns between 85% and 98%.

An entire generation of Chinese internet assets is undergoing a collective valuation reset. What framework is the market using to price these companies? Or has the framework itself died?

Anchoring and Uprooting

Looking back, the valuation logic for Chinese internet has undergone a remarkably clear process of "anchoring-unanchoring."

From 2014 to 2017, the core narrative of global capital markets for Chinese internet was "trading at a discount to US peers."

Alibaba was China's Amazon, Tencent was China's Facebook plus China's Visa, Baidu was China's Google.

This methodology was simple and powerful: first find the valuation multiple of the comparable US company, then apply a China market growth premium and a governance discount to arrive at a fair price. Under this framework, Chinese internet companies commonly enjoyed P/E ratios of 20 to 40 times.

Foreign capital flooded in, Chinese ADRs were a must-have asset. This was the first anchor.

In 2018, the US-China trade war began. Global capital was forced for the first time to consider a question it had previously avoided: if US-China relations shifted from cooperation to competition, were the legal structures of companies operating in China but listed in the US still reliable? The VIE structure had never received explicit recognition from Chinese law, but no one cared during a bull market. The trade war exposed this latent vulnerability to sunlight for the first time. The valuation anchor loosened, but was not yet uprooted.

In October 2020, Ant Group's listing was suspended. The international capital market's pricing of "Chinese regulatory risk" shifted from a vague discount factor to an explicit core variable. The 2021 anti-monopoly crackdown pushed this logic to its extreme. Alibaba was fined 18.2 billion yuan, Didi was investigated the day after its IPO, and the education and training industry was wiped out overnight. Chinese ADRs went from "growth premium" to "regulatory discount."

In 2022, the fear of delisting for Chinese ADRs reached its peak.

The SEC placed Alibaba, Baidu, JD.com, and over a hundred other Chinese ADRs on a "provisional delisting list." Although the US and China eventually reached a compromise on audit working papers, the damage was done. Global index funds began systematically reducing the weighting of Chinese ADRs, and some institutional investors liquidated their positions directly due to compliance requirements. This structural withdrawal from the capital side compressed valuations from being sentiment-driven to being capital-flow-driven.

In early 2025, the sudden emergence of DeepSeek briefly ignited a wave of hope. Deutsche Bank called it China's "Sputnik moment," predicting that the valuation discount on Chinese assets would disappear.

The stock prices of Alibaba and Tencent rebounded over 60% in the first two months of 2025. But this revaluation driven by the AI narrative fizzled out in less than six months. Entering 2026, the Pentagon added Alibaba and Tencent to the "Chinese Military Companies" list, Anthropic publicly accused Chinese companies of launching large-scale distillation attacks on its Claude model, and Nasdaq introduced new listing rules for Chinese ADRs tightening liquidity thresholds. Every attempt to rebuild a valuation anchor was quickly shattered by new geopolitical shocks.

At this point, the "discount to US peers" valuation methodology has completely failed. The market no longer prices these companies based on their business models, growth rates, or profitability.

But things aren't that simple.

"Old Guard Stocks" on Both Sides of the Pacific

Turning our gaze from Chinese ADRs on the NYSE to the US tech giants traded in the same building, we find: the market has abandoned far more than just Chinese internet.

Microsoft was the worst-performing stock among the "Magnificent Seven" in 2026, down over 20% for the year, falling from a peak near $490 at the end of 2025 to around $360. Its P/E ratio compressed from a five-year median of 34 times to 22 times, its lowest level in three years.

The company's fundamentals are intact: Azure cloud revenue grew 39% year-over-year, AI business annualized revenue exceeded $37 billion, and quarterly net profit of $31.8 billion was an all-time high.

The market doesn't care about these numbers. It cares about another number: $190 billion – Microsoft's total capital expenditure budget for 2026, almost entirely directed at AI infrastructure. Quarterly capital expenditure alone exceeded the total annual spending five years ago. Free cash flow dropped from $20.3 billion to $15.8 billion, the gap between profit and cash tearing wider.

Microsoft's plight is not an isolated case.

All of the Magnificent Seven underperformed the S&P 500 in 2026. The combined capital expenditure of the four major hyperscale cloud providers (Amazon, Microsoft, Alphabet, Meta) this year is approaching $700 billion. The GPU clusters and data centers this money buys will only generate revenue over a depreciation cycle of 3 to 5 years. Investment is front-loaded, returns are back-loaded, and free cash flow is crushed in between.

The deeper problem is: these companies are deploying massive amounts of capital to pursue a technological paradigm that could potentially disrupt their own business models.

Microsoft's core revenue comes from Office subscriptions and Windows licenses, a SaaS model charging per user, with growth near a ceiling. The business logic of the AI era is consumption-based billing – pay for the number of tokens used.

CEO Satya Nadella has publicly acknowledged that every per-user billing business at Microsoft will transition to a hybrid "user + usage" model. GitHub Copilot already switched entirely to consumption-based pricing in June 2026. But the market's concern is precisely this: the old model had extremely high margins; no one knows if the new model can maintain the same level.

From a distance, this picture forms a structural mirror of the difficulties faced by Alibaba and Tencent.

Alibaba's core e-commerce business is an extremely high-margin advertising machine, as stable as Microsoft's Office, yet the market gives it increasingly lower valuation multiples. Tencent's WeChat ecosystem remains the strongest moat in Chinese internet, but game revenue growth is slowing, and its advertising business faces erosion from short-video platforms – a situation echoing Microsoft being squeezed by Alphabet in search advertising.

The old giants on both sides are desperately investing in AI to save themselves. Alibaba is spending $55 billion to build AI infrastructure, Microsoft is spending $190 billion. But the markets on both sides are casting a vote of no confidence on whether this money can be recouped.

Chinese internet professionals tend to attribute their companies' declines to regulatory crackdowns and geopolitics. US tech professionals tend to attribute Microsoft's decline to "overspending." Peeling away the surface narratives, the same underlying event is occurring: AI-native companies are redefining the value chain of the entire tech industry, and the previous generation of platform giants, regardless of nationality, are transitioning from "companies defining the future" to "companies needing to prove they won't be eliminated by the future."

On the Chinese internet, these stocks have acquired a precise nickname – Old Guard Stocks.

Nikkei: A Cautionary Tale of a Dying Valuation System

This phenomenon of "the valuation coordinate system itself being replaced" is not the first in global capital market history. The most comparable case study is Japan after 1989.

On December 29, 1989, the Nikkei 225 index closed at 38,915 points, its all-time high.

That year, eight of the ten largest companies globally by market cap were Japanese. NTT's stock price reached 3 million yen per share just two months after its IPO in 1987, making the company's market value exceed the combined value of the eight largest US companies at the time. Land prices in Tokyo were 350 times those in Manhattan. Sony acquired Columbia Pictures, Mitsubishi bought Rockefeller Center.

Investors in Japan at that time, much like Chinese internet professionals in 2020, genuinely believed their system would dominate the future of the global economy.

The trigger for the bubble's burst was the Bank of Japan raising interest rates. But the extent of the decline was only the most superficial feature of this crisis. The duration and nature of the decline were truly suffocating.

The Nikkei halved in the first half of 1990 and was cut in half again to 14,000 points by 1992. If it had stopped there, it would have been an ordinary bubble burst and valuation correction. But the Nikkei didn't stop there. It continued to drift lower for another decade, falling to 7,600 points in 2003, an 80% drawdown from its peak.

The core reason for this decade-long decline was not the collapse of Japanese corporate competitiveness.

Toyota was still the world's best car manufacturer, Sony was still creating epoch-making consumer electronics. The problem lay at a deeper level: global capital no longer believed in the "Japan premium."

Before 1989, the market's valuation framework for Japanese companies was "the world's most efficient manufacturing civilization + a perpetually growing domestic market + unique corporate governance advantages."

After the bubble burst, these three assumptions were negated one by one. Manufacturing advantages were caught up by South Korea and China, the domestic market fell into deflation and population aging, and corporate governance proved to be a breeding ground for inefficiency. The old valuation framework died, but a new one was slow to emerge.

In 1989, 32 of the top 50 global companies by market cap were Japanese. By 2018, only Toyota remained.

How long did this vacuum period last? About 25 years. The Nikkei only began a true trend reversal in 2012 and didn't re-cross 38,915 points until February 2024. And the catalyst for this revaluation was not a comprehensive revival of the Japanese economy.

One specific individual, using a new language, redefined "why one should buy Japanese assets."

In the summer of 2019, Warren Buffett began buying shares in Japan's five major trading houses. The logic of this investment was completely different from how the market had viewed Japan for the previous three decades. Buffett didn't talk about GDP growth rates, demographic trends, or technological innovation. His reasoning was extremely simple: these five companies had low valuations, high dividends, stable cash flows, and were progressing with genuine corporate governance reforms. He hedged currency risk using yen-denominated bonds and lent his own reputation to back Japanese assets. By 2025, Berkshire's stake in the five trading houses approached 10%.

Buffett provided a new valuation language for Japanese assets. The old language was "Japan will dominate the global economy"; the new language was "low valuation + high dividends + corporate governance reform."

Where is the "New Language" for Chinese Internet?

Placing Japan's timeline alongside the experience of Chinese internet reveals several structural similarities that cannot be ignored.

The old valuation framework is dead. The failure of the "discount to US peers" model parallels the collapse of the "Japan will dominate the world" narrative. In both cases, corporate fundamentals didn't completely deteriorate; what was negated were the macroeconomic assumptions supporting the valuation premium. For Chinese internet, the macro assumption was "deep integration of the Chinese market with global capital markets will continue." For Japan, it was "the Japanese model represents the most efficient form of capitalism." Both assumptions have been falsified.

A new valuation framework has yet to be established. The current market pricing of Chinese internet assets is essentially applying discounts amidst the ruins of the old framework. Like Japan in 1995, the market knows the old price is wrong but doesn't know what the new price should be.

Based on Japan's experience, this vacuum period could be much longer than most expect. From the bubble burst to the market's acceptance of a new valuation framework, it took Japan about 25 years. The systematic dismantling of the Chinese internet's valuation system began around 2020, only six years ago. If Japan's timeline is any guide, the current position might just be the early stages of the revaluation process.

But key differences exist between China and Japan. Japan's asset revaluation was accompanied by long-term deflation and population decline; corporate profitability did indeed deteriorate significantly after the bubble burst. The leading Chinese internet companies are still profitable. Tencent's annual net profit exceeds 220 billion RMB, and Alibaba's core e-commerce cash flow remains robust. This suggests that if a new valuation language can be constructed, the pace of revaluation could be faster than Japan's.

What could be the "new valuation language" for Chinese internet?

AI is the most obvious candidate, but also the most contradictory.

Over the past two decades, the underlying business model of global internet companies has been highly convergent: capture users' attention, aggregate traffic onto platforms, and then monetize through advertising, e-commerce commissions, or in-game purchases.

AI is shaking the foundation of this business.

When AI agents can compare prices, place orders, and plan itineraries for users, users no longer need to open Taobao themselves and browse page by page. When AI can recommend or even generate content based on preferences, the time users spend "scrolling" on any single platform decreases. As attention shifts from human eyes to the interface of AI agents, the gateway for traffic changes, and the platform's strategic position as an intermediary is hollowed out. This poses a threat to almost every core internet track: e-commerce, search, social media, content, and gaming.

If any Chinese internet company can successfully transition from an "attention platform" to an "AI infrastructure and service provider," it could potentially gain a new valuation language.

The cruelty of this path is that proactive disruption means dismantling the most profitable legacy businesses with one's own hands.

Taobao's advertising revenue is built on paid merchant rankings. If an AI agent bypasses rankings and helps users select products directly, this revenue stream will shrink. Every step of transformation is an erosion of existing profits, while the profitability of the new model remains unproven.

If you chase AI, you endure the crushing impact of massive capital expenditure on free cash flow – Microsoft's PE dropping from 34x to 22x is the outcome of this story. If you don't chase AI, the market judges you as obsolete.

Microsoft is betting $190 billion on rewriting its revenue structure. Win, and it becomes the infrastructure of the new era. Lose, and it's the biggest capital misallocation in history.

Shareholder returns are the second candidate. Both Tencent and Alibaba