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State-backed Shenzhen Capital warns of metaverse, semiconductor overvaluations amid hype in China

  • The chairman of Shenzhen Capital Group said overvaluations in the hyped-up metaverse and strategically important semiconductor industries could be harmful
  • The metaverse is promising, he said, but the firm has so far avoided investing in virtual reality because it has not lived up to the hype

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View of Shenzhen in the Greater Bay Area on April 28, 2019. Photo: SCMP/ Martin Chan
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The flood of money into hyped-up industries involving the metaverse and semiconductors have led to overvaluations that could be harmful in the long run, warns Ni Zewang, chairman of Shenzhen Capital Group, a major government-backed venture capital firm in China.

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“We recognise [metaverse] as a future trend and a promising technology, but without an actual application scenario, it won’t be able to create any value,” Ni said during a group interview at the Beyond Expo in Macau on December 2.

“If the bubble expands quickly in a short time, it won’t benefit the technological development of the industry,” he said. “But if the valuation could rise gradually as the technology advances, it would help the companies grow in a healthier way.”

Shenzhen Capital Group chairman Ni Zewang warned of overvaluation in the much-hyped metaverse field at the Beyond Expo in Macau last week. Photo: Handout
Shenzhen Capital Group chairman Ni Zewang warned of overvaluation in the much-hyped metaverse field at the Beyond Expo in Macau last week. Photo: Handout
Metaverse, the concept of a shared 3D virtual environment that is considered the next iteration of the internet, has been one of the hottest buzzwords among tech entrepreneurs and investors this year. It got a boost in October when Facebook rebranded itself as Meta. Chinese Big Tech companies have also shown eagerness to embrace the technology.
Conceptually, the metaverse promises a lifelike, immersive virtual world where people can meet, work and play using devices like virtual reality (VR) headsets and smartphones, among other gadgets. However, there is no consensus about what the metaverse actually looks like in practice.

Chinese state media have warned investors against buying into the hype. Last month, Communist Party mouthpiece People’s Daily warned against what it sees as a market frenzy, saying “everyone still needs to stay rational in understanding the current metaverse mania”.

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The best timing for investors to move into the field is when the technology is ready to be put to use, Ni said. Shenzhen Capital, he noted, has been cautious about investing in overhyped industries, which helped it avoid the decline of China’s peer-to-peer lending industry.

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