Wall Street refuses to pay for soft Silicon Valley

Image source @ Visual China

Text | Lu Jiu Finance

Recently, the Amazon earnings report that reached the market expectations made the company's stock price soar all the way, smoothly exceeding 10% in the intraday, while Meta, which released the earnings report earlier, suffered a 25% decline in Waterloo, which is also a profitable Internet technology company, why is the fate completely different?

Around the Chinese New Year, major Silicon Valley technology giants such as Apple, Microsoft, Google, Meta and Amazon have released their quarterly financial reports, except for Meta, the rest of the giants have ended the year in a form that exceeded expectations:

Amazon's net profit for the quarter was $14.2 billion, up 98.6% year-over-year;

Microsoft's net profit for the quarter was $18.765 billion, up 21% year-over-year;

Apple's net profit for the quarter was $34.63 billion, up 20% year-over-year;

Google's net profit for the quarter was $20.6 billion, up 35.5% year-over-year;

Meta's net profit for the quarter was $10,285 million, down 8% year-over-year.

Apparently, in the past quarter, Silicon Valley's tech giants have turned on the printing press model, and the shadow of the epidemic seems to have no impact on their business.

But if we look closely at the composition of their earnings reports, it's very easy to see a common problem: these tech giants, all eating the old money, none of their innovative businesses have grown into a real second growth curve, zuckerberg's Meta because of the continued loss of the metacosm, resulting in a sharp decline in the post-earnings stock price, the market value evaporated by $230 billion.

It's clear that Wall Street is no longer willing to pay for the internet dreams of silicon valley, which is not growing at a high rate; Wall Street now has a crush on companies that are trying to use hardware to drive the world's progress again.

As a result, Asia's highest-value company by market capitalization became TSMC, and Musk secured the throne of the world's richest man, and his earnings call was the most worthwhile and innovative conversation of the quarter.

Wall Street's expectations for Silicon Valley

Windows and Office, which Bill Gates left behind, remain Microsoft's main source of revenue today: Windows contributed $6.6 billion, Office contributed $11.2 billion, and Microsoft's overall revenue for the quarter was $51.7 billion.

And Apple is even more so. At present, the composition of all of Apple's revenue sources is almost indistinguishable from the Jobs era. Strictly speaking, after losing Jobs, Apple seems to have only successfully released an AirPods headset, as Bill Gates once worried, the success of Apple's hardware and software integration ecology is highly dependent on Jobs. But the good news is that Tim Cook is a particularly lucrative CEO who is using his way to renew Apple's life — but not in a way that comes to life.

Google faces the same problem. Search advertising remains its main source of revenue, with revenue of $75.33 billion, advertising revenue of $61.24 billion, and search advertising alone of $43.3 billion.

The above three companies, after the earnings report, the stock price has risen, and Google will take advantage of the chase: split the shares, so that small and medium-sized investors can participate.

Look at other companies that haven't met expectations.

The biggest headache should be Zuckerberg, Meta's earnings report shows that the quarterly revenue of $33.7 billion, including advertising sales of $32.6 billion; net income of $10.3 billion, monthly active users of 2.9 billion, all indicators are less than expected.

Subsequently, the stock price fell by 25%, directly evaporating the market value of 230 billion US dollars, and four Baidus were gone.

It's clear that Wall Street is no longer willing to pay for Silicon Valley's future business, and they don't have confidence in Zuckerberg's metacosm.

Reality Labs, Meta's "metacosm" development arm, reported huge and growing losses, losing more than $10 billion to $10.2 billion in 2021 and earning just under $2.3 billion.

Capital is always the smartest: Without business and product innovation, Silicon Valley's tech giants have to honestly make money. Moreover, to continue to squeeze the current market, we must maintain growth every quarter, and once there is negative growth and there is no huge innovation in business and products, capital will immediately leave.

Truly patient capital, rare at home and abroad. At that time, Apple also launched a series of products such as iPod, iPhone, iPad, etc., and the stock price soared. Away from the long period of user cultivation of Internet habits of hardware products, Wall Street has no longer loved.

In addition to Meta, Netflix's stock price hit its biggest drop in nearly a decade after announcing a less than expected earnings report; after the release of the PayPal's unsatisfactory earnings report, the stock fell nearly 25%, and the market value evaporated by $51 billion.

Chinese stocks, which are also slowing down their growth, what kind of encounters will they usher in next? In essence, Wall Street has already given the answer, and a look at Pinduoduo, which has fallen 70% of its stock price, can be glimpsed.

The Internet became an ordinary existence

Why is this happening? Once Wall Street was willing to burn money for all the Internet that is still losing money, and today it has become so harsh? The answer is that the business is mature and the future is visible.

The biggest difference between Microsoft's Nadella and Apple's Cook, compared to their predecessors Gates and Jobs, is that the former is a professional manager, while the latter is a real entrepreneur and inventor, the former is responsible to capital, and the latter is responsible for himself.

Once the CEO of a great company can't become the center that really drives product and business innovation, the company will most likely become a mediocre company, just like Jack Welch, although he created GE, which was the largest market capitalization at the time, but also made GE lose its soul, rich and boring.

If, in the above subheading, we are expounding on the ruthlessness of Wall Street capital, then from another point of view, Wall Street capital will always be the most rational existence, because they know where to bet.

Who has earned wall Street's biggest double trust in time and money over the past decade?

Obviously, it is Elon Musk, who owns a series of companies such as Tesla and SpaceX. If you say wall Street is no longer willing to pay for its dreams, what is the explanation for Musk's story of years of continuous losses? After all, Tesla has been losing money for more than 15 years.

Wall Street is not only willing to pay for Tesla's losses, but also Weilai, Ideal, and Xiaopeng, which are listed in the United States, have also become the targets of losses, but Internet companies that are also from China have been treated differently, and the general stock price has fallen by more than 40%.

On the surface, many media interpretations are that capital is no longer optimistic about China's Internet companies; in essence, Wall Street will no longer have patience with any Internet company in the world, the aura of the Internet has been lost, these companies, like all ordinary companies, need to work for data, and capital will no longer pay for stories.

The above data has been well proved: the United States domestic Internet companies, can not meet expectations, the end is the same.

So why is Meta, which is gambling on the next Internet revolution, also fallen into the object of capital spurn? Obviously, capital believes that this is not the next generation of the Internet, or that the next generation of the Internet is still far away.

The important thing at the moment may be to start with the hardware. After all, our world is still driven by physics. As a result, TSMC became the company with the highest market capitalization in Asia, and hardware maniac Musk became the world's richest man.

As Musk said on a recent Tesla earnings call, it will be an AI robotics company that is developing neural network supercomputers; the tech company that has risen by as much as 450% in the latest year has never talked about any Internet imagination, and all of its business is at the bottom of the Internet — computing power.

The Internet has made the world soft for twenty years, and finally returned to the era of hardware drive.

What should our internet companies do?

The above incidents are all things on the other side of the ocean, and where should our Internet companies go?

In the past year, we have not heard any major Internet financing events from the primary market; in the secondary market, the Internet giants have basically all fallen by more than 10%.

Obviously, our Internet boom has receded more intensely. So, after a year of being spurned by capital and public opinion, let's see what the essence of the Internet really is.

First of all, the Internet boom is first of all because of the emergence of computers and mobile phones, which is gradually formed, in essence, the Internet is a computer-driven industry, or from hardware innovation.

Secondly, the Internet has accelerated the flow of information in the world, improved the transparency of information in society as a whole, accelerated the flow of information, and made the world run faster.

Finally, the essence of any business model is profit, and the Internet is the same, because the platform after the data is more likely to produce information monopoly, resulting in the sequelae of the Internet platform economy gradually emerging: the Internet because of the aggregation of information, not only did not bring an era of equality as Negroponte predicted, but also brought an increasingly monopolistic status quo, and the Internet giants mastered the optimal resources of society.

Apple, which has hardware strength, after issuing a privacy protection policy last year, directly led to the change in advertising revenue of many Internet companies this year, so it can be seen how hypocritical it is for Internet companies to say "do no evil".

Why, metaverses proposed by Meta corporations, are not paid for by capital? Obviously, the future internet they sketch out at present does not solve any of the problems that exist in today's Internet: monopoly, data, privacy, security...

The metacosm just makes the Internet three-dimensional, but even so, our giants are still unwilling to give up the opportunity, after all, afraid of gambling mistakes, Tencent, ByteDance, Baidu and a series of other companies are quietly layout.

But what is really lacking in the world? In fact, smart money has already given the answer: hardware innovation.

TSMC's rise to become Asia's most valuable company, and Musk, who owns Tesla, SpaceX and StarChain, continue to be the world's richest man, all of which tell us that we need a wave of new hardware to drive the next generation of technology revolution.

There are a few points of inspiration that are now foreseeable.

First, our world is not just about the Internet, the Internet is not everything, and data is not necessarily the oil of the future, even though it has been working on oil for nearly two decades. Energy, materials, and biology are replacing the Internet as investment hotspots for the next three decades, recombining new computing solutions and our future lives.

Second, the next generation of technology needs to make society equal, to data controllable, to respect personal privacy, to the conversion between carbon-based life and silicon-based signals, to provide us with a more superior experience of society, and to have the least impact on the environment, and improving efficiency is no longer the greatest demand, because improving efficiency often comes at the expense of experience and the environment.

Finally, many of our Internet companies may be completely transformed into technology companies in the future. For now, Baidu is the most likely of these companies to achieve this transformation ahead of schedule. Baidu and Google, two companies that have made their names on search, are moving toward two very different fates, Baidu All in AI and autonomous driving, while Google's focus is still hovering over the traditional advertising business.

Perhaps, Baidu, which has been regarded as a loser for many years, is now worth re-examining and seriously studying by those of us Internet giants who are known as successful representatives.

The future of Internet companies must not be in the Internet, the Internet is the cause, but it is not necessarily the effect.