The true internet bubble replays are Web3 rather than AI.

Author: TVBee

Players in the stock market and cryptocurrency are worried that AI might repeat the internet bubble of 2000, but it is actually Web3 that is the true reenactment of the internet bubble.

Bubble: Supply-side Self-indulgence, Demand is Lacking

During the internet bubble phase of 2000, funds were self-indulgent on the supply side, with many internet-listed companies not having profits or cash flow at all, yet their stock prices skyrocketed.

On the other hand, the demand side of internet applications was pitifully small... Before 2000, there was no Douyin, Kuaishou, Alibaba, JD, or WeChat.

The mainstream internet applications at the time were only early forms of QQ, chat software like OICQ and MSN, download tools like Kazaa and WebAnt, information platforms like Yahoo, NetEase, and Sohu, basic applications like Google Search and email, and early e-commerce platforms like Amazon and eBay, which had very few users.

At that time, there was no mobile internet, personal computers were considered luxury items, and most families in the country did not have computers; the monitors were also the bulky types. Laptops were as thick as bricks, and going online depended on dialing up via a telephone line. The storage mediums were even older, mainly floppy disks, yes, the A: drive. The capacity was only 1.44M, barely enough to store a slightly larger image today.

It is worth mentioning that there were single-player games at the time, but they were pixelated games.

AI: Leading Infrastructure Stocks Surge, Products Growing

Looking at the AI industry, although stock prices have risen sharply, companies like Nvidia, AMD, Hynix, Samsung, and Micron... are mainly AI leaders and are infrastructure-oriented, because AI requires substantial training before being put to use. On the supply side, AI has not inflated into a bubble as exaggerated as in 2000. At least these leading AI companies do have considerable profits.

On the demand side, we can at least see various UGC applications like Gemini, Claude, GPT, Doubao... and the recently popular Lobster, the just-launched Perplexity Personal Computer... the AI robot that caught attention during the Spring Festival Gala... although the breadth of AI products cannot yet be compared to that of internet products in 2000, this is because the development of AI demands high infrastructure requirements; AI needs to develop its infrastructure first before it can integrate into more types of applications.

Web3: Technology as a Gimmick, Applications Few

Market Capitalization and Profitability

Now looking at the Web3 industry, various technical narratives abound, however, how many applications truly have users? Apart from a handful of leading DeFi projects, there may be only MEME platforms, prediction markets, and perpetual DEX; many of the activity in the latter two is still driven by interactions from airdrop expectations.

Corresponding to the scarce demand-side products is the self-indulgence on the supply side.

⏵ Example from the ZK track: ZKsync with a daily income of $458 has a circulating market capitalization of $176 million, equivalent to a PE ratio of 1052.

⏵ Example from the L2 track: Optimism with a daily income of $2,427 has a circulating market capitalization of $253 million, equivalent to a PE ratio of 285.

⏵ Example from the L1 track: Sei with a daily income of $3,564 has a circulating market capitalization of $424 million, equivalent to a PE ratio of 327.

There is also Blast, with a daily income of -$6...

If we follow the logic of the stock market, shareholders in the first three projects would have to wait 1052, 285, and 327 years respectively to break even; this does not even account for the infrastructure and operational costs needed to maintain these chains.

Although these ecosystems are not relying on on-chain returns for breakeven and profitability, for shareholders, that is, token holders, this is a nightmare...

What Web3 Applications Are There?

Now looking at what Web3 applications exist?

The once-discussed metaverse, chain games, inscriptions, social networks... and possibly other applications we can't even remember, are now hardly mentioned.

Current applications that still have users, besides DeFi and RWA, are almost limited to meme, prediction markets, and perp DEX. Among these, meme is PvP for existing funds, while some activity in prediction markets and perp DEX still arises from interactions driven by airdrop expectations.

Comparing to the internet applications mentioned earlier from 2000, Web3 applications are indeed very few...

In Conclusion

Therefore, the true self-indulgence on the supply side, lacking accomplishments on the demand side, is not AI, but Web3.

There is overlap with U.S. stock players from 26 years ago; investors and Wall Street are deliberately avoiding a historical repeat. AI has a bubble, but it differs from the internet bubble of 2000.

Conversely, in the younger Web3 field, capital speculates on technology on the supply side, while there are very few truly practical products on the demand side; this is the reincarnation of the internet bubble of 2000.

Based on moderate AI bubble and high Web3 bubble reasoning:

First, the U.S. stock market will retrace, but the likelihood of a crash like in 2000 is low.
Second, BTC, which is linked to the U.S. stock market, will suffer a moderate impact.
Third, just like the internet bubble of 2000, altcoins will continue to be washed out, forming a painful process of distinguishing the real from the fake; this process may take longer than I imagine.

Currently, altcoins have overall dropped for approximately 15 months since the end of 2024, but this is not the endpoint.

Do not believe the claims that altcoins have bottomed out; some altcoins have hit the bottom, but others have not.

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