PL and ASTS peaked about 2 weeks before SpaceX IPO.
Micron peaked about 2 weeks before SK Hynix ADR listing.
Samsung peaked about 3 weeks before SK Hynix ADR listing.
It’s interesting, isn’t it?
I looked it up for other similar events.
Visa was different.
Mastercard stock rose with Visa debut.
At the beginning of the 21st century, China was transforming faster than any major economy in modern history.
After joining the WTO in 2001, factories spread across the country. Steel mills, cement plants, highways, airports and apartment towers appeared almost overnight. GDP grew at roughly 10–14% annually. Millions of people bought cars for the first time. Every additional factory required electricity; every truck consumed diesel; every construction site demanded asphalt.
China’s oil consumption reflected this transformation.
Between 2000 and 2007, Chinese oil demand nearly doubled, growing from roughly 4.8 million barrels per day to over 7.5 million barrels per day. China became the second-largest oil consumer in the world after the United States.
At the same time, global supply struggled to keep pace.
Years of underinvestment following the late-1990s oil collapse left little spare production capacity. Geopolitical risks—including the Iraq War, unrest in Nigeria, and concerns about Iran—added further uncertainty. Commodity investors began describing the period as the beginning of a “commodity supercycle.”
Crude oil rose relentlessly:
To many investors, there seemed to be only one conclusion:
China would continue growing forever.
Oil prices would continue rising forever.
Therefore, oil companies would become permanently more profitable.
Among Chinese companies, none symbolized this story better than PetroChina.
Unlike many newly listed private companies, PetroChina represented ownership of China’s most strategic industry.
It controlled massive upstream oil reserves, pipelines, refineries and distribution assets.
To domestic investors, buying PetroChina meant buying China’s economic miracle itself.
The company had already listed H-shares in Hong Kong in 2000 and ADRs in New York.
However, most mainland investors could not easily purchase overseas shares.
The A-share IPO therefore became something entirely different:
For the first time, ordinary Chinese investors could own what many considered the country’s most valuable enterprise.
Demand became extraordinary.
By late 2007, Chinese equities were already experiencing one of history’s largest valuation bubbles.
The Shanghai Composite had risen from roughly 1,000 points in mid-2005 to more than 6,000.
Retail investors opened brokerage accounts at record speed.
Newspapers discussed stocks on front pages.
Taxi drivers and university students debated IPO allocations.
People queued outside brokerage offices.
Mutual funds sold out within hours.
There was widespread belief that the Chinese government would never allow the stock market to fall significantly.
Liquidity flooded into every large IPO.
Internationally, oil companies remained reasonably valued despite high oil prices.
Approximate valuation before the PetroChina A-share IPO:
| Company | Forward P/E (approx.) |
|---|---|
| ExxonMobil | 10–12× |
| Chevron | 9–11× |
| BP | 9–10× |
| Shell | 9–11× |
| Total | 9–11× |
Investors largely assumed oil prices would eventually normalize.
Chinese investors reached a completely different conclusion.
The PetroChina A-share IPO was priced at RMB16.70.
On its first trading day:
At the day’s high, PetroChina briefly became the world’s largest listed company by market capitalization, exceeding US$1 trillion.
Yet the underlying business had not changed.
The same oil fields.
The same refineries.
The same earnings.
Only the market where investors traded the shares had changed.
The implied valuation was estimated at roughly 45–60× earnings depending on methodology—roughly four to six times the multiple of global oil majors.
This was not because PetroChina was dramatically more profitable than ExxonMobil.
It was because investors believed China’s growth would remain extraordinary forever.
Several forces reinforced one another.
China’s GDP was booming.
Oil prices were making new highs almost every month.
The Shanghai market itself was already euphoric.
Mainland investors had limited investment alternatives.
PetroChina represented both national pride and perceived scarcity.
Many investors believed:
“If China’s economy doubles again, PetroChina must also double.”
Few asked the more important question:
“What if today’s profits already assume exceptionally high oil prices?”
The distinction between a great company and a great investment disappeared.
On November 5, 2007, PetroChina reached its all-time A-share high during its first minutes of trading.
It would never revisit that price.
Only months later, the global financial crisis began unfolding.
Oil prices collapsed from US$147 to below US$40.
Commodity profits normalized.
Shanghai Composite Index fell by more than 70%.
PetroChina’s valuation gradually converged toward international oil majors.
The company remained one of China’s largest and most important enterprises.
The business largely survived.
The valuation did not.
The PetroChina A-share IPO remains one of history’s clearest examples of the difference between a wonderful company and a wonderful stock.
Almost every part of the bullish narrative proved true:
Yet investors who purchased at the IPO peak suffered enormous long-term losses because they paid a valuation that assumed an almost perfect future.
The lesson was never that PetroChina was a poor business.
The lesson was that even the greatest businesses can become poor investments when narrative, liquidity, scarcity and optimism combine to overwhelm valuation.
That distinction continues to echo in every market cycle—from technology in 2000, to Chinese equities in 2007, to other periods when investors begin believing that “this time is different.”
Bifurcation is coming.
SOTA (State-of-the-Art) models will collaborate / use the best hardware, i.e. latest GPU from Nvidia, HBM from SK Hynix, etc.
SOTA model war is between OpenAI and Anthropics, plus Google.
Meanwhile, Microsoft and Meta will be another group.
This group will prioritize TCO (Total Cost of Ownership) and use another group of hardware suppliers, like those offered by Qualcomm, announced in Qualcomm Investor Day.
Xiaomi has been doing buybacks with stock price falling, e.g.
June 22 bought back 6.42m shares for HK$152mn, avg. price at HK$23.68
June 23 bought back 8.44m shares for HK$193mn, avg. price at HK$22.86
People joked that Xiaomi is quite good at buying and selling its own shares.
How good is Xiaomi?
1/ When Xiaomi stock was at more depressed levels (2022 & 2023), it didn’t buy back more aggressively.
In 2021, Xiaomi bought back at avg. HKD 24.5 per share; spent about 8.4bn HKD.
In 2023, when Xiaomi stock is only half of 2021 buyback price, Xiaomi spent 1.5bn HKD in buyback, which is 18% of 2021 in dollar amount.
The number of shares bought back decreased year over year from 2021 to 2023: 344mn -> 235mn -> 127mn.
2/ Xiaomi is good at selling.
The company sold 800 million shares at HK$53.25 each in March 2025; raised $5.5 billion.
In Dec 2020, Xiami sold 1.0bn Class B shares at HK$23.70 per share, plus $855 million through seven-year, zero-coupon convertible bonds, raising $4 billion in total.
—
Be careful – when Xiaomi resumed buybacks in late 2025 and stepped up in 2026, it’s good but it doesn’t mean much – it could be like 2021.
Given the recent bubble-like feeling, it’s useful to see where to hide if this is like dot-com era.
How did small cap value outperform?
1/ less crowded
Small cap value are less exposed to dot-com exuberance. Less impacted by fund inflow/outflow. Less exposed to leverage.
2/ interest rate cuts
In 2001, Fed cuts Fed funds rate target from 6.50% in 2000 to 1.75% in Dec 2001.
Small caps benefits more from rate cuts, as large caps already enjoyed low funding costs.
3/ cheap
Small cap value is better than small cap (Russell 2000) likely due to more margin of safety and little multiple downside (less dream value).
| Year | IWN / small-cap value | Russell 2000 |
|---|---|---|
| 2001 | +12.9% | +2.5% |
| 2002 | -11.4% | -20.5% |
From 2021 to today,
Solar in aggregate went from 3 trillion rmb to 2 trillion rmb;
Baijiu in aggregate went from 5.4 trillion rmb to 2.4 trillion rmb.
These two sectors along lost 4 trillion rmb in market cap.
Guess who gained?
Banks in aggregate went from 10 trillion rmb to 14 trillion rmb in market cap, gaining 4 trillion rmb in about 4.5 years.
Solar and Baijiu are more private companies.
Banks are more SOEs.
Solar is a representation of how involution destroyed value;
Baijiu is a representation of how declined consumption/macro pressured stocks.
2021 hot stocks = everything tied to cheap money + retail speculation:
1. Meme stocks: GameStop, AMC, BlackBerry, Bed Bath & Beyond. GameStop became the symbol after the Reddit short squeeze in Jan 2021.
2. EV / clean energy: Tesla, Rivian, Lucid, Fisker, Nikola, QuantumScape, ChargePoint, Plug Power. Many EV SPACs later collapsed 70–90% from peaks.
3. SPACs / IPOs: 2021 was peak IPO/SPAC mania. Big names included Rivian, Coupang, Roblox, Coinbase, UiPath, Affirm, Robinhood. 2021 had about 980 IPOs globally, roughly double 2020.
4. Cathie Wood / ARK-style growth: Zoom, Teladoc, Roku, Square/Block, Coinbase, Palantir, Unity, Twilio, Shopify. ARKK was the “disruptive innovation” proxy, but by late 2021 it was already down sharply as rates rose.
5. Crypto / fintech: Coinbase, Silvergate, Signature Bank, Marathon Digital, Riot Blockchain, MicroStrategy, Robinhood, Block.
6. SaaS / cloud: Snowflake, Datadog, Cloudflare, Asana, Monday.com, Atlassian, CrowdStrike, Zscaler.
7. Stay-at-home / reopening extremes: Zoom, Peloton, DocuSign first; then airlines, cruises, casinos, hotels during reopening rotation.
Meme, crypto and EV have no real earnings.
Even SasS/Cloud depends on future projection of rapid revenue growth, not near-term earnings.
The 2021 bull run is more like internet bubble in its essence.
And when interest rose, bubble burst.
2026 is different – it’s more about tech advancement.
In the current bull run, most companies have real near-term earnings and interest rate is 3%+.
Current interest rate is more in-line with inflation, while 2021 interest rate is obviously lower than inflation.
However, space and quantum can still make me feel more bubble-like.
From 2016 to 2026,
US federal gross debt grew from ~$19 trillion to ~$38 trillion.
US total market cap grew from $25 trillion to ~$75 trillion.
Debt doubled and market cap tripled.
That is probably higher valuation but also can mean better structure of the economy, better competitiveness, better margins.
A rough decomposition of the gap might be:
Consensus can be right for a long time — ride it while reflexivity is reinforcing it, but be ready to turn contrarian near the inflection point.
It is not “always go against consensus.”
George Soros says the crowd is right 80% of the time.
“Most of the time I am a trend follower … Only at an inflection point are we rewarded.”
His key idea is reflexivity: market prices are shaped by investor bias, and those prices can then affect fundamentals, creating boom-bust loops. So the contrarian opportunity is when the market’s “prevailing bias” has gone too far and starts to reverse.
Being contrarian for most of the time is dangerous.
Being contrarian in investing for too long can be dangerous.
On the upward trend, if you are against the trend and short the stocks, Tiger Mgmt is a case in point – Tiger Management, run by Julian Robertson, effectively shut down in March 2000, right as the dot-com bubble was peaking.
Robertson was acting like a classic contrarian:
Both statements were true.
But Soros would likely argue that Robertson fought the trend too early. A reflexive bubble can become much larger than valuation alone would justify.
On the downward trend, if you are against the trend and long the stocks, there is a term called “value trap”.
Sometimes the crowd is right: the business is structurally deteriorating, ROIC is falling, or the terminal value is lower than historical multiples suggest.
For value traps, the key question is not “is it cheap?” but:
What changes the prevailing trend?
In the case of investing and cigar butt investing like what Warren Buffett did in his early days, he bought near/below liquidation value.
In addition, he had an exit path.
Cigar-butt investing often worked through liquidation, tender offers, buybacks, asset sales, control pressure, or mean reversion. It was not “this bad business will become great.”
So Buffett avoided value trap with asset/liquidation value protection + catalyst/control.
That is even harder in China, as there is little space for an activist in China investing.