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Money-Losing Winners: Unprofitable Tech Stocks in the U.S. and China

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As U.S. equities hit record highs to close out 2020, market observers pointed to the rally in shares of unprofitable new economy stocks as a potential sign of investor overexuberance. A simple portfolio made up of money-losing U.S. companies in the tech sector shot up nearly 130% from the depths of March 2020 through February 2021.

Those tracking China’s mainland stock market will naturally wonder whether one of 2020’s best performing major markets—up over 27% last year—has seen similar signs of froth. That was certainly the case in the runup to an infamous bubble in China A shares back in 2015, when a price plot of junk tech stocks went nearly vertical.


Investors will be surprised to find that the situation in 2020 was a much different one for Chinese stocks, whose recent rally has been fueled more by genuine fundamental improvement amidst a strong economic rebound from the pandemic than irrational overvaluation of unprofitable new economy shares, which rose only modestly on the year, increasing by just 14% and underperforming the broader market.

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This document is for information purposes only. It is not a recommendation to buy or sell any financial instrument and should not be construed as an investment advice. Any securities, sectors or countries mentioned herein are for illustration purposes only. Investments involves risk. The value of your investments may fall as well as rise and you may not get back your initial investment. Performance data quoted represents past performance and is not indicative of future results. While reasonable care has been taken to ensure the accuracy of the information, Rayliant does not give any warranty or representation, expressed or implied, and expressly disclaims liability for any errors and omissions. Information and opinions may be subject to change without notice. Rayliant accepts no liability for any loss, indirect or consequential damages, arising from the use of or reliance on this document.


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