Fu Peng: Market's Tolerance for AI Investment-Return Ratio Decreases, Focus on Long-Term Returns

On August 13, Fu Peng, Chief Economist of New Fire Group, pointed out that Tencent's latest free cash flow has turned negative, similar to Alibaba and major companies in Silicon Valley such as Meta and Google, due to significant capital expenditures in AI disrupting the previous model of high free cash flow and stable share buybacks and dividends. Fu believes that since Q2 of this year, the market's tolerance for the mismatch between AI investment and returns has significantly decreased. The revenue from the application side is still in the verification phase relative to the cumulative investment of hundreds of billions, and investors need to see quantifiable long-term returns. Current investor sentiment has shifted from previous enthusiasm to caution. The next few quarters are a critical window period, and it is essential to see genuinely optimistic and quantifiable revenue growth to dispel investors' doubts. During this waiting period for ROI proof or disproof, as long as there are no significant external systemic shocks, the overall market will remain in a state of "not investing is not an option, but investing also seems unwise," characterized by fundamental support below but reluctance to short, and scrutiny of ROI above but hesitation to go long blindly. The capital market is waiting for a "killer application," while the industry is looking for the "breakthrough point of unit computing power cost" and the "critical point of workflow reconstruction."

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