Before AI changed the world, major shareholders took the lead in cashing out and getting rich

Original Source: Market Value List

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After ChatGPT became popular, technology seems to be accelerating to change the world.

They say that in the age of AI, all products are worth re-upgrading with large models; AI will empower thousands of industries; AI will work for you and become your assistant, and humans only need to do interesting things; Nearly, there will be no border between virtual and reality…

The “ideal” world has triggered a climax in the capital market, and the doubling rate is not high. The stock prices of Hongbo, Zhongke Information, and Wondershare Technology have all increased by about four times.

But now, the general public has no subversive feelings about the changes brought about by AI, and its industrial application and value are not yet deep. Shareholders of listed companies on the AI track have begun to retreat, and some have reduced their holding Also bears traces of “well-designed”.

This phenomenon undoubtedly casts a shadow over the craze.

The decision of the major shareholders has triggered the market’s thinking: Is this the excessive hype of AI listed companies? Or some companies do not have real AI technology and applications, but just use the concept of AI to drive up their stock prices? What is the hype logic of AI concept stocks? What should be paid attention to in each stage of hype? This article will answer the above questions.

AI “wind of holdings reduction” is blowing at home and abroad

Recently, in the A-share market, the reduction of AI shares has become a hot topic. Some people joked that if the government does not reduce its holdings of AI stocks, it is too embarrassing to call itself an “investor”. **

The shareholding reduction of major shareholders is like a sharp sword, piercing the confidence of the market, and the stock prices of companies on the AI track have plummeted.

The biggest drop in share price was Kunlun Wanwei. On June 20, it announced that the ex-wife of the company’s actual controller, Li Qiong, planned to reduce its shareholding in the company by 3%. The company’s stock price fell by 20% the next day and 12.77% on the third day. On June 28, the four trading days fell by 30%, and the market value evaporated by more than 26 billion yuan.

On June 14, before releasing the shareholding reduction plan, Kunlun Wanwei announced that it would acquire an AI track company, Singularity AI Technology, at a price of US$160 million (approximately RMB 1.1 billion), to increase AI and vigorously develop The image of AI is vivid on the paper. Kunlun Wanwei said that after the completion of the acquisition, it will make every effort to build a world-leading AGI platform.

The announcement also stated that half of the funds obtained from Li Qiong’s reduction of holdings will be lent to Kunlun Wanwei at a relatively low interest rate to support the development of the company’s AGI and AIGC businesses.

** The front foot is good, and the back foot is bad. The exchange also issued a letter of concern, asking Kunlun Wanwei to explain whether there is any situation of manipulating the stock price with the help of market hotspots and cooperating with Li Qiong to reduce its holdings. **

Regardless of whether this is a plan for reducing holdings or not, Singularity AI Technology’s assets are less than 5 million yuan, and its liabilities are as high as 39 million yuan. It is worth 1.1 billion yuan. Whether it can support the ambition of building a world-leading AGI platform is very important. Big question.

According to media statistics, since the beginning of this year, at least 9 major shareholders of A-share AI companies have divorced, such as Fubon, 360, Tongcheng New Materials, Kexin Technology, Tiandi Digital, Tonghe Technology, Huitian New Materials, Saiteng Shares, Zhuo Shengwei. Among them, the ex-wife of the actual controller of Tiandi Digital completed the reduction of 56,800 shares in May and June.

In addition, Inspur Information, as one of the leading companies in artificial intelligence computing power, also recently issued a shareholding reduction announcement saying that the three executives of the company will reduce their holdings of 656,700 shares in the company.

Wind data shows that since the beginning of this year (as of June 28), including artificial intelligence, AI computing power, AI robots, AI applications, AIGC, and ChatGpt concept stocks, the number of completed and ongoing reductions is 510. Exceeding last year’s reduction of 469 pens.

**The moon in foreign countries is not as round as China’s, and the US stock market has also seen a trend of reducing holdings of AI listed companies. **

Nvidia, the leader in computing power, was greatly reduced by the asset management institution of the Rothschild family, a veteran European financial family. In addition, two board members reduced their holdings by more than US$100 million.

Not long ago, after the stock price of Oracle Corporation, which has attracted attention due to AI, hit a record high, founder Larry Ellison reduced his stock holdings by US$640 million by exercising options.

**There are many reasons for the wave of AI holding reduction and the decline in stock prices. **

Some market participants interpreted this phenomenon as the whole world is planning a wave of AI industry regulation, which made many investors nervous; some countries began to worry that AI technology might pose a threat to their national security, so they strengthened their Some interpreted it as concerns about the slowdown in economic recovery and the impact of the Fed’s interest rate hike on market sentiment.

In short, no matter what causes the stock prices of global AI companies to fall, the main reason is that these companies are overvalued and overhyped by the market.

As Benjamin Melman, the global chief investment officer of the Rothschild family asset management institution, said: Given the high valuation of AI AI, we are less and less sure… If (valuation) continues to grow, we will even become more cautious. **

Emotional Elevation vs. Excessive Optimism

Hype on concept stocks is not uncommon in the stock market. These stocks are usually based on a popular concept or innovative technology, soar in a short period of time and attract a lot of attention. However, this hype also often brings bubbles and risks.

In November 2022, the release of ChatGPT attracted the attention of countless media and users: 1 million active users within 5 days of its launch, 10 million users in 1 month, and 100 million users in 2 months, becoming the fastest growing in history One of the consumer applications. Affected by this, in January 2023, ChatGPT concept stocks began to rise sharply.

As of now, Nvidia’s stock price has risen by more than 200% so far this year, with a market value of more than $1 trillion. Others BigBear.ai rose 247%, C3.ai rose nearly 198%, Meta rose 140%, Amazon and Oracle rose 54% and 46% respectively, Microsoft and Google rose 40% and 39% respectively.

Domestic listed companies also rose along with the United States. Since the beginning of the year, the stock prices of Hongbo, Zhongke Information, and Wondershare Technology have all increased by about four times, Jinqiao Information and Cambrian have more than tripled, and Kunlun Wanwei has increased by nearly 250%. %, and the stock prices of China Taiyue and Foxit Software have also more than doubled.

The logic of concept stock speculation lies in expectations and scarcity.

**First, expectations are an important factor in the speculation of concept stocks. **

Investors usually judge a company’s future development prospects based on market trends, industry prospects, and company news reports.

According to statistics from SimilarWeb, a web traffic data website, ChatGPT’s global visits reached a new high in April, reaching 1.76 billion times, surpassing other international search engines such as Bing and DuckDuckGo, reaching 2% of Google and 60% of Baidu.

After the success of ChatGPT, Google announced that it was developing the Gemini large model, and Amazon Cloud also released the Bedrock tool for training AI models. Large and small domestic enterprises and start-up companies keep up with the pace. Among the leading enterprises, Alibaba’s Tongyi Qianwen, Baidu’s Wenxin Yiyan, Tencent’s Hunyuan large model, Huawei’s Pangu large model, industry companies such as SenseTime, University of Science and Technology of China Xunfei.

According to statistics, within three months, Chinese companies released at least 79 basic models.

Domestic and foreign companies have released AI-related technology products and large-scale models. Their original technology accumulation and AI concept have also given investors reasons to be optimistic about their future profitability and growth potential.

**Second, scarcity is also an important factor in the speculation of concept stocks. **

Concept stocks usually refer to companies with unique business models, advanced technologies or scarce resources, and the products or services of these companies have unique and competitive advantages in the market.

In the field of AI, scarcity is mainly manifested in resource barriers and capability barriers.

The AI field requires advanced technology research and development capabilities and talent pools, as well as certain advantages in data resources. Therefore, there are relatively few companies that can set foot in the AI field.

For example, ChatGPT is scarce in terms of language resources, pre-training data, algorithm optimization, talent reserves, and scenario applications, making it a leader in the NLP field.

**One of the reasons why the stock price is too high is that there is no consensus on the valuation methods of new models and new technologies. **

For new themes, especially technological breakthroughs that have not yet reached commercialization and income levels, their valuation does not apply to traditional methods such as price-earnings ratio and price-to-book ratio. Consensus takes time.

For example, when money-burning Internet companies went public in the United States one after another, they created a valuation method that takes the number of users and revenue growth rate as the core factors. For AI stocks, some institutions use PS to value them. Therefore, investors will think that Nvidia’s price-to-sales ratio of nearly 30 times is too high, and there are other valuation methods.

In the acquisition of Kunlun Wanwei mentioned above, a valuation method was mentioned - the market research rate, that is to say, regardless of whether the research and development has achieved results, whether the research and development results can be implemented, or whether it can bring commercial benefits , as long as the money is spent on research and development, the more money spent, the higher the valuation.

According to the market research rate, the valuation of Singularity AI Technology can reach 1.7 billion yuan.

The difference in understanding of valuation methods is also the reason why AI stocks tend to “overshoot”.

Although AI concept stocks are currently hot in the market, investors need to be very cautious when pursuing them. Nowadays, many companies are rubbing against the concept of AI, but there are only a handful of companies with real strength.

Cyclical fluctuations and value distortions

The development cycle of the industry is usually divided into five stages: technology trigger period, overheating period, bubble burst period, recovery period and maturity period. The best time to invest is usually in the initial stage, the overheating stage and the recovery stage.

Generally speaking, the hype process of the industry can be divided into three stages, namely the concept hype stage, the core enterprise hype stage and the performance hype stage.

**First, the concept hype stage can be understood as from 0 to 1, as long as you get involved in the concept, you can reap gains, which is also an overheating period. **

The concept hype stage is the early stage of industry development. The growth prospect of the industry is vague, and investors mainly rely on the expectation of the industry potential to make investment decisions. Investors pay attention to potential growth points such as new technologies, new models and new markets in the industry, as well as expected earnings and profits.

In 2016, after AlphaGo defeated Li Shishi, there was a wave of investment boom in the field of AI. As a result, the stock prices of companies such as robots in the A-share market rose. In 2017, in the primary market, the number of AI investments in China and the United States reached 477 and 533, respectively, with an amount exceeding US$10 billion and US$5 billion respectively.

However, due to the ambiguity of the commercialization prospects of AI, the stock prices of AI concept stocks such as robots began to fall soon. By 2019, both the number and value of investments in China have dropped significantly, and the number of investments in the United States has also declined in 2018. In April 2020, Wave Computing, a high-profile AI chip manufacturer, declared bankruptcy.

Therefore, in the stage of conceptual speculation, the investment risk is relatively high, because these potential growth points have not been verified in practice, and the expected returns may fail.

The last wave of quotations in the secondary market was also at this stage.

The coverage of AI is extremely wide, including computing power, chips, switches, CPO, etc. upwards, and application software and hardware companies downwards, all of which performed well in this round of market prices.

The next step is the stage of the big waves washing the sand.

**Second, the hype stage of core enterprises is a process from 1 to 100, and enterprises with core competitiveness will be highlighted. **

This stage is from the peak of excessive expectations to the trough of bubbles.

In the primary market, there may be some closures and mergers. In fact, it has been reported that some generative AI startups in the United States have fallen into the predicament of “money but no data”, unable to move forward, and better performers The company may usher in a new round of financing.

Information disclosure in the secondary market is more complete. Whether listed companies are seriously investing in and operating AI as a business, or just a concept, will reveal the truth. What investors need to do is to pay close attention.

Those with strength will gain more market share, merge other companies, and exit without strength. At this stage, the valuations of companies in the AI industry chain will diverge.

**Third, the performance hype stage is mainly based on the actual performance of the company and future development prospects to make investment decisions. **

At this stage, the industry has matured, and corporate performance and future prospects have become the main factors that investors pay attention to.

At this stage, investors need to focus on the company’s actual performance indicators such as financials, sales, and profits, and assess future strategies and growth potential. At the same time, investors also need to pay attention to factors such as the company’s market competition and industry policies, and make reasonable judgments and decisions on the company’s valuation.

Conclusion

In the 1970s and 1980s, after the United States emerged from the stagflation crisis, the traditional manufacturing industry could no longer serve as the engine of economic development. The US economy began to transition from investment-oriented to innovation-oriented, and technological innovation gradually replaced steel and automobiles.

The U.S. stock market has also started a ten-year bull market. Especially after 1995, the trend of technology stocks benefiting from the information technology revolution was even more magnificent.

At that time, as long as listed companies added an e- prefix or a .com suffix to their names, their stock prices could rise. This was also nicknamed “prefix investment.”

On March 10, 2000, the Nasdaq Composite Index hit a peak of 5408.6, then fell, and began to fall sharply on March 13, which is the famous “Internet bubble”.

In this crisis, NetEase’s stock price fell to the point where it was almost sold by Ding Lei.

Of course, there are also many excellent IT companies that have survived and proved their worth, such as Amazon, Google, and Netflix.

From a large perspective and a long-term perspective, bubbles are not necessarily a bad thing. Excellent companies grow out of bubbles, but for individual investors, the destructive effects of bubbles and the consequences of missteps are Heavier than a mountain.

references:

[1] “Amazon Cloud Technology Gu Fan: China’s generative AI model will not be eaten by one family” Yicai.com

[2] “Google DeepMind CEO reveals: the next generation of large models will be integrated with AlphaGo” Xin Zhiyuan

[3] “ChatGPT visits reached a new high of 1.76 billion in April” TechWeb

[4] “AI company, also began to go bankrupt” investor

[5] “AlphaGo” reflects the 100 billion artificial intelligence market A-share “AI” concept companies can pay attention to" Daily Economic News