Hey Facebook, China’s Coming for You!

There’s a good chance you’ll hear a lot about Facebook Inc [NASDAQ:FB] today. There’s an even better chance it will all be about Facebook’s stock price.

You will hear that it fell over US$120 billion.

You will hear that user growth was down.

You will hear that their growth has slowed.

But you won’t really hear why. And you won’t hear that the hard times might not be over. In fact, they might just be finally kicking off.

For all the mainstream media coverage of FAANG (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) stocks, today FAANG is no more.

Now when you look at the biggest stocks in the US, it’s all AAA. That’s not AAA ratings like you get from Standard & Poor’s.

It’s Apple, Alphabet and Amazon.

These are the three biggest US stocks by market cap. They have respective market caps of US$954.5 billion, US$881.8 billion and US$877.2 billion.

It’s seems as though the FAANGs have lost their teeth.

Facebook now is marginally bigger by market cap than Alibaba Group Holding Ltd [NASDAQ:BABA]. And then breathing down both their necks is Tencent Holdings Ltd [OTC:TCEHY].

Note: Tencent is listed on the Hong Kong stock exchange. But it is also traded over-the-counter (OTC) in the US.

You don’t really hear too much about the likes of Alibaba or Tencent in Australia. You don’t really hear too much about them in the US or here in the UK.

They are two of the world’s most powerful tech companies that no one really knows about. Try asking your mum or dad what Apple does? Ask them what is Facebook? They’ll likely know exactly.

But ask them what Alibaba does? Ask them who is Tencent? My guess is they’ll have no idea at all.

And that’s because these two giants of industry are based in China. That’s their main market. It goes to show just how influential the Chinese market is when these two rank so high in market cap.

What if BAT gets a proper foothold outside of China?

Tencent is probably one of the most progressive companies in the world. I’d go so far to say they’re more progressive than Amazon or Alphabet will ever be.

Tencent has been around for 20 years now. Although as I say, you would never know it. They’re predominately involved in internet related businesses: QQ and WeChat (instant messaging), WeChat Pay (mobile payments), Tencent Games and QQ music.

They do social networks, payments, entertainment, cloud and data services, information cataloguing (a bit like Google and YouTube) and more recently artificial intelligence (AI).

They’ve also been heavily developing self-driving cars. Last May they received a licence to test their self-driving cars in Shenzhen, China.

Of course Alibaba is also pushing forward in these areas. They’re known as the ‘Amazon of China’. But they too are investing in AI: autonomous systems, robotics and connected networks.

and then there’s Baidu, another giant from China.

Together, Baidu, Alibaba and Tencent are collectively known as BAT. Sounds funny right? But then again, so does FAANG.

BAT, however, is more than a media acronym. The Chinese government has recruited BAT to develop and accelerate the country’s technology leadership.

China is helping BAT to progress artificial intelligence and autonomous systems. It’s designed to take China far ahead of the competition across the Pacific.

Facebook and the other giants of the US markets might have a strong hold on the world. But they barely register in China.

So, ask yourself this: what do things look like if the likes of BAT get a proper foothold outside of China? If Tencent expands and really establishes in Europe and wider Asia, then how big do they get?

The FAANGs are a target for China. And BAT is coming at them hard. When they arrive they’ll make the market cap of Apple, Amazon and Alphabet look tiny.

You think Apple’s US$1 trillion valuation is big. Wait until the Chinese really get going.


Sam Volkering

Edtior, Tech Insider

PS: How Aussie investors could potentially win big when China takes on Silicon Valley — Download your free report now.

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

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