U.S. Star Fades Overnight, AI a Fleeting Moment

The seven tech giants in the United States have recently suffered a continuous plunge.

On April 25th, the American AI giant Meta saw a staggering intraday drop of 15.51%, with its market value evaporating by approximately 1 trillion at the close.

Moreover, the seven major AI companies in the U.S. have been plummeting consecutively.

Is the epic bubble of AI really about to burst?

Why has the American virtual economy, guarded by a vast amount of dollars, suddenly collapsed?

Is the nightmare of the Nasdaq's plunge of over 75% in 2000 due to the internet bubble going to be reenacted?

Is the AI bubble about to burst?

The bursting of the U.S. internet bubble in 2000 was an absolute nightmare in American financial history, which also led to a crisis of trust in the dollar and gradually contributed to the U.S. subprime crisis in 2008.

Since then, the U.S. has initiated multiple rounds of QE policies, essentially flooding the market with money.

The direct cause of the current U.S. debt crisis is the increase in U.S. fiscal spending, and the fundamental reason is the massive money printing in the U.S. Apart from the dollar tide we often talk about, which harvests other countries, another purpose of the dollar flood is that the first recipients of the currency can exert its maximum purchasing power.

Now, the U.S. AI bubble is driving the U.S. stock market to new highs, and an important reason is that these over-issued dollars need a sponge to absorb the extra dollars in the context of global de-dollarization, maintaining the dollar's value and prolonging the life of the dollar's hegemony.

So, is the AI bubble really about to burst?

By learning from history, we can understand the rise and fall.

Although I can make a judgment, there will always be dissenters.

So let's analyze the bursting of the U.S. internet bubble in 2000, and you can make your own judgment.

At that time, the Nasdaq index plummeted by more than 75% in half a year.

It's important to understand that this is not a single stock, but the overall market value of an exchange.

Except for countries like Zimbabwe, where the stock market can plummet by 99.99%, such financial disasters rarely occur.

Our stock market crash is just a drop in the ocean compared to the U.S. internet bubble.

At that time, the U.S., through the Plaza Accord and by striking at American manufacturing, defeated Japan, whose economic total was approaching that of the U.S.

Many of Japan's technology industries flocked to the U.S. With the rapid development of U.S. internet technology and the influx of a large amount of investment funds, the stock prices of new economy industries represented by the internet rose rapidly, and the U.S. stock market showed an unprecedented prosperous scene.

However, behind this prosperity, there were hidden huge risks.

The formation of the internet bubble is closely related to the policies of the U.S. government.

In order to deal with the Asian financial crisis, the Federal Reserve lowered interest rates and introduced tax cuts, further pushing the internet boom.

However, these policies did not really solve the economic problems, but instead exacerbated the formation of the bubble.

The bursting of the internet bubble is also related to the excessive optimism and speculative behavior of investors.

During the internet bubble, the stocks of information technology, computer, and telecommunications industries rose the most, but the price-earnings ratio and the price-to-book ratio also reached an incredible high level.

Investors blindly pursued high returns, ignoring the actual performance and risks of the company, leading to the continuous expansion of the bubble.

Finally, in 2000, the internet bubble burst, and the Nasdaq reached its highest point of 5048 points.

In the following two years, the decline exceeded 75%.

Federal Reserve Chairman Greenspan believed that the internet bubble was too large and announced a substantial interest rate hike, leading to the bursting of the internet bubble.

The bursting of the U.S. internet bubble in 2000 was a complex financial event.

Now you can apply these reasons to the current U.S. AI bubble.

First, the internet bubble was formed to deal with the Asian financial crisis, stimulated by the massive money printing: The AI bubble is to deal with the 2008 subprime crisis and the 2018 mask black swan event.

The strength of these two large money printings far exceeds that of 2000.

Is it exactly the same?

Second, the pursuit of emerging concepts by investors, at that time it was the internet, now it is AI artificial intelligence.

The typical representative of AI chips, Nvidia, has a price-earnings ratio that has reached 70 times.

This exceeds the average valuation of American technology companies in recent years, such as Apple, a representative of the manufacturing industry, with a price-earnings ratio of only 25 times.

The price-earnings ratio is the stock price divided by earnings per share.

This value is usually used in investment to measure the investment value of stocks, and it can also show how many years you need to recover the cost of your investment in stocks.

The size of the price-earnings ratio represents different meanings.

For example, the lower the price-earnings ratio, the more investment value your stock has, because it represents that your stock can bring you more returns in the future.

The price-earnings ratio will also change with the changes in stock price and earnings.

The investment value of a company is to consider the trend of changes in the price-earnings ratio.

Third, the direct cause of the bursting of the internet bubble was the interest rate hike in the U.S. Now, is it facing the same problem?

So, I don't need to make a conclusion, you already have the answer, right!

It's better to teach a man to fish than to give him a fish.

Meta's intraday plunge exceeded 15%, and Nvidia, Microsoft, Meta Platforms, Google's parent company Alphabet, and Super Micro Computer and other AI hot companies all plummeted, with Super Micro Electronics' one-day decline plummeting by 23.14%.

So, what impact does this have on us?

Is it our opportunity?

What does it mean for China?

Where is China's lead?

New energy vehicles, photovoltaic power generation, wind energy, unmanned driving, unmanned aerial vehicles, unmanned docks, intelligent manufacturing, communication technology, etc.

What about the U.S.?

Virtual economy, virtual stores, virtual girlfriends, the only two that can be taken out are Tesla and Apple, and now they are also on the decline.

The U.S. is now suppressing electric vehicles and jointly developing independent 5G communication technology with Western countries, which is to suppress and suppress China's high-end manufacturing.

Moreover, Western capital Wall Street capital is also strongly cooperating, which is the ability of the U.S. to reverse black and white.

For example, the U.S. has reduced the proportion of electric vehicles in the U.S. from 68% to 35% by 2035, and relaxed the emission standards of fuel vehicles.

The carbon emissions and environmental protection that were talked about before are now not mentioned at all.

Why?

I have said many times before, that is, we have already controlled the entire industry chain of new energy vehicles, and the U.S. can't compete.

For example, more than 80% of Tesla's parts come from China.

So how does Wall Street capital do it?

Let's talk about Buffett.

The annual Buffett shareholder meeting on May 4th is about to start, and Buffett will definitely talk about industries such as new energy, banks, and oil.

What has Buffett done recently?

Continue to issue yen bonds, hold yen short positions, and reduce technology stocks, and start to increase oil stocks.

Regarding Buffett's investment in Japan, my article on April 24, "The hunt begins, Buffett leads to short selling, Trump launches a general attack," has a very detailed analysis, and I will not repeat it here.

Don't care too much about the title.

Reducing technology stocks and increasing oil stocks, such as reducing Tesla BYD, is to cooperate with the adjustment of U.S. policy.

One of the three major U.S. rating companies we are familiar with, the controlling party is Buffett.

This company is the U.S.'s consistent move, and has never lowered the U.S. rating, but the other two in the U.S. have been reduced.

This also shows the interests he represents behind him.

So, for us, we must not be disturbed by the outside world, and we must develop industry and manufacturing according to our own pace, and there must be no mistake.

For the U.S., if the bubbles they create burst, the most injured are still the American people.

The U.S. should face its own problems and create less contradictions.

The U.S. has the financial advantage of the U.S., and we also have our core competitiveness, the core technology and manufacturing industry, which is the foundation of a strong country, and we are steadily moving forward on the right path.