U.S. TMT Industry and Discussion: Supply Chain, Valuation, Buying Points | U.S. TMT Industry and Discussion

TMT stands for Technology, Media, and Telecom. Over time, it has expanded to cover the internet, semiconductors, software, cloud computing, AI, entertainment, 5G/6G, and hardware devices. You can think of it as the most dynamic sector in the U.S. stock market, and the one most likely to produce "giants." Apple, Microsoft, Google, Meta, NVIDIA, Netflix—all are TMT representatives.

TMT stands for Technology, Media, and Telecom. Over time, it has expanded to cover the internet, semiconductors, software, cloud computing, AI, entertainment, 5G/6G, and hardware devices. You can think of it as the most dynamic sector in the U.S. stock market, and the one most likely to produce「giants」. Apple, Microsoft, Google, Meta, NVIDIA, Netflix—all are TMT representatives.

It has three main characteristics:

Its three main characteristics are:

• High growth: Huge market potential, with exploding user numbers and data.

High growth: Huge market potential, with exploding user numbers and data.

• High volatility: Driven by tech cycles, regulation, and valuation expectations—once growth slows, stock prices often drop by half.

High volatility: Driven by tech cycles, regulation, and valuation expectations—once growth slows, stock prices often drop by half.

• High concentration: Winner-takes-all; once a leader is established, its moat is very deep.

High concentration: Winner-takes-all; once a leader is established, its moat is very deep.

2. Why is it hard for TMT companies to "take home" profits?

Why is it hard for TMT companies to “take home” profits?

Many assume TMT giants with trillion-dollar valuations are just "making easy money." The reality is different, for several reasons:

Many assume TMT giants with trillion-dollar valuations are just “making easy money.” The reality is different, for several reasons:

High ongoing investment: Whether in cloud or AI, it’s a cash-burning game. Without heavy spending, rivals will disrupt you.

High ongoing investment: Whether in cloud or AI, it’s a cash-burning game. Without heavy spending, rivals will disrupt you.
Economies of scale come with upfront sacrifice: Netflix burned cash for a decade before profitability to win users and content.

Economies of scale come with upfront sacrifice: Netflix burned cash for a decade before profitability to win users and content.
Regulation and taxation: U.S. authorities increasingly scrutinize monopoly, data, and privacy—fines and break-up risks loom.

Regulation and taxation: U.S. authorities increasingly scrutinize monopoly, data, and privacy—fines and break-up risks loom.
Valuations come more from imagination than cash flow: Markets often price companies 10 years ahead, so profit and market cap aren’t linear.

Valuations come more from imagination than cash flow: Markets often price companies 10 years ahead, so profit and market cap aren’t linear.

👉 But an important note: not all TMT profits are equally fragile.

• Application layer (social, streaming, e-commerce): Low switching costs, profits easily eroded. Example: Netflix lost share quickly to Disney+ and Amazon Prime.

Application layer (social, streaming, e-commerce): Low switching costs, profits easily eroded. Example: Netflix lost share quickly to Disney+ and Amazon Prime.

• Infrastructure layer (semiconductors, computing, OS, telecom IP): Profits are more stable due to high barriers and switching costs. Example: NVIDIA’s CUDA ecosystem, TSMC’s process technology—nearly impossible for rivals to take.

Infrastructure layer (semiconductors, computing, OS, telecom IP): Profits are more stable due to high barriers and switching costs. Example: NVIDIA’s CUDA ecosystem, TSMC’s process technology—nearly impossible for rivals to take.

In short: Application-layer profits are fragile, infrastructure-layer profits are resilient.

3. Investment insights from NVIDIA

Investment insights from NVIDIA

In the 2010s, NVIDIA was seen as a "gaming GPU maker," but it kept investing in general-purpose GPU computing. When AI and deep learning exploded, it became the core computing supplier.

In the 2010s, NVIDIA was seen as a “gaming GPU maker,” but it kept investing in general-purpose GPU computing. When AI and deep learning exploded, it became the core computing supplier.

Investment takeaways:

• In TMT, the key isn’t current profit—it’s whether the firm is the "indispensable infrastructure provider."

In TMT, the key isn’t current profit—it’s whether the firm is the “indispensable infrastructure provider.”

• By the time NVIDIA’s earnings exploded, the stock was already up dozens of times.

By the time NVIDIA’s earnings exploded, the stock was already up dozens of times.

• The real buy opportunities often come "before the industry boom, when financials still look ugly."

The real buy opportunities often come “before the industry boom, when financials still look ugly.”

4. Key drivers of TMT stocks

Key drivers of TMT stocks

Main points:

Tech inflection points: AI, cloud, 5G, MR—any breakthrough lifts the whole chain.

Tech inflection points: AI, cloud, 5G, MR—any breakthrough lifts the whole chain.
Cost of capital: TMT needs early financing to burn cash and expand. Rising rates tighten funding, pressuring valuations.

Cost of capital: TMT needs early financing to burn cash and expand. Rising rates tighten funding, pressuring valuations.
User growth and penetration: For TikTok or U.S. streaming, once saturation nears, valuations correct fast.

User growth and penetration: For TikTok or U.S. streaming, once saturation nears, valuations correct fast.
Policy and geopolitics: U.S.-China trade war, chip export bans, Huawei/AI restrictions—all reshape the sector.

Policy and geopolitics: U.S.-China trade war, chip export bans, Huawei/AI restrictions—all reshape the sector.

5. Experience in TMT investing

Experience in TMT investing

Many ask: TMT stocks look expensive—how to value them?

• Valuation models: Traditional PE/PB don’t work—many lack short-term profit. Use EV/Sales, PEG, and discounted FCF.

Valuation models: Traditional PE/PB don’t work—many lack short-term profit. Use EV/Sales, PEG, and discounted FCF.

• Buy signals: Two main cases:

Buy signals: Two main cases:

When inflection points aren’t fully priced (e.g., NVIDIA in early AI, 2016).

When inflection points aren’t fully priced (e.g., NVIDIA in early AI, 2016).
When markets are overly pessimistic (e.g., Meta in 2022: metaverse losses cut valuation, but ads stayed strong).

When markets are overly pessimistic (e.g., Meta in 2022: metaverse losses cut valuation, but ads stayed strong).

So valuation isn’t about "cheap vs expensive" but "future growth vs relative risk."

So valuation isn’t about “cheap vs expensive” but “future growth vs relative risk.”

6. Background of tech stock surges

Background of tech stock surges

In 2020, U.S. TMT stocks surged due to:

COVID drove remote work, cloud, e-commerce, streaming—demand exploded early.

COVID drove remote work, cloud, e-commerce, streaming—demand exploded early.
Fed stimulus, zero rates, capital flooded into growth stocks.

Fed stimulus, zero rates, capital flooded into growth stocks.
Permanent user behavior shifts (Netflix, Zoom, Amazon).

Permanent user behavior shifts (Netflix, Zoom, Amazon).

This was a classic case of "demand pulled forward + liquidity boost."

This was a classic case of “demand pulled forward + liquidity boost.”

7. TMT opportunities in U.S.-China trade tensions

TMT opportunities in U.S.-China trade tensions

The rivalry creates dual investment outcomes:

• U.S. firms: Restricted in China, but more focused on U.S./EU apps like cloud and AI SaaS.

U.S. firms: Restricted in China, but more focused on U.S./EU apps like cloud and AI SaaS.

• Chinese firms: Forced into "self-reliance," accelerating semis, software, and industrial internet.

Chinese firms: Forced into “self-reliance,” accelerating semis, software, and industrial internet.

• Investment opportunities:

Investment opportunities:

• Upstream semiconductor materials, EDA tools (U.S. dominates, China catching up).

Upstream semiconductor materials, EDA tools (U.S. dominates, China catching up).

• Cloud and computing (both sides keep investing, demand stays strong).

Cloud and computing (both sides keep investing, demand stays strong).

• Content/apps going global (TikTok model: avoiding local regulation, seizing global traffic).

Content/apps going global (TikTok model: avoiding local regulation, seizing global traffic).

8. Investment logic along the TMT value chain

Investment logic along the TMT value chain

The TMT chain is long; break it into layers:

Infrastructure (hardware, semis, telecom): Logic = tech barriers + capex cycles.

Infrastructure (hardware, semis, telecom): Logic = tech barriers + capex cycles.

• Examples: TSMC (manufacturing), NVIDIA (compute), Qualcomm (IP).

Examples: TSMC (manufacturing), NVIDIA (compute), Qualcomm (IP).
Platform (OS, cloud, search, social): Logic = scale + network effects.

Platform (OS, cloud, search, social): Logic = scale + network effects.

• Examples: AWS, Azure, Google Cloud.

Examples: AWS, Azure, Google Cloud.
Application (content, entertainment, e-commerce): Logic = user growth + monetization.

Application (content, entertainment, e-commerce): Logic = user growth + monetization.

• Examples: Netflix, TikTok, Shopify.

Examples: Netflix, TikTok, Shopify.

Security & enterprise software: Logic = essential + long-term contracts.

Security & enterprise software: Logic = essential + long-term contracts.

• Examples: Palo Alto Networks, Snowflake.

Examples: Palo Alto Networks, Snowflake.

Different layers, different valuation:

• Upstream hardware: Sales multiples + capacity cycles.

Upstream hardware: Sales multiples + capacity cycles.

• Platforms: FCF and user retention.

Platforms: FCF and user retention.

• Applications: User metrics and monetization.

Applications: User metrics and monetization.

9. Key principles for TMT investing

Key principles for TMT investing

Don’t over-focus on quarterly earnings—watch tech cycles and market position.

Don’t over-focus on quarterly earnings—watch tech cycles and market position.
Best entries come during fear or pre-inflection.

Best entries come during fear or pre-inflection.
Traditional valuation doesn’t fit—accept that "high multiples can be rational."

Traditional valuation doesn’t fit—accept that “high multiples can be rational.”
U.S.-China rivalry isn’t just a risk—it’s also a new opportunity.

U.S.-China rivalry isn’t just a risk—it’s also a new opportunity.
Look layer by layer: app profits fragile, infra profits solid.

Look layer by layer: app profits fragile, infra profits solid.