Investors Have Cut China’s Internet Giants Down to Size
HONG KONG—Investors in China’s biggest internet companies have suffered through a tumultuous 2021, a lackluster 2022 and a disappointing 2023. After a lousy three years for the once-hot sector, many investors are asking—where do things go from here? The Chinese internet sector has lost more than $1.2 trillion in market value since the start of a regulatory crackdown that has resulted in fines, troubled restructuring attempts and changes to business strategies.
The shares of former stock-market darlings Alibaba, Tencent Holdings and JD.com have more than halved in value from their peaks, and investors are now betting on the rise of their smaller and nimbler rivals. Before December, investors were eager to bet on online game makers like Hangzhou-based NetEase, whose sales and profits soared in 2023.
But just before Christmas, Chinese authorities delivered another blow to the sector. The country’s videogame regulator proposed new rules to limit the amount of time and money people spend on computer and smartphone games, causing a massive selloff in the shares of NetEase and its larger rival Tencent.
It was also a rude shock to many investors who had believed that China’s regulatory crackdown on the country’s tech giants was over. That clampdown began in late 2020 with the cancellation of fintech company Ant’s blockbuster initial public offering, and resulted in fines for Alibaba, delivery giant Meituan, ride-hailing company Didi Global, Ant and other companies.
Tencent won’t need to fundamentally change its business model or gaming operations as a result of the draft rules, said Vigo Zhang, a Tencent Games executive responsible for China public affairs. The recent selloff seemed more punitive than the possible hit to the
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