Review of Metaverse, AI, and New Energy Investment Narratives

Narrative Investing 2026-01-06

I. Investment Narratives: The Invisible Force in the Market

Investment narratives refer to story frameworks formed around specific themes or concepts that can influence investor decisions and market prices. These narratives often contain optimistic expectations about the future, capable of stimulating investor imagination and enthusiasm, thereby driving up valuations of related assets. However, narrative-driven investments often come with bubble risks. Understanding the cyclical nature of narratives is crucial for investors.

1. The Lifecycle of Narratives

Typical investment narratives usually go through the following stages:

Emergence Stage: A few forward-looking investors discover emerging themes and start positioning
Diffusion Stage: Media and analysts begin to pay attention, and the narrative gradually spreads
Mania Stage: Market sentiment reaches its peak, massive capital inflows, valuations detach from fundamentals
Burst Stage: A gap appears between reality and expectations, the bubble bursts, and prices correct significantly
Rational Stage: Market returns to rationality, quality companies stand out, and the industry enters a healthy development phase

2. Psychological Mechanisms of Narrative-Driven Behavior

Investment narratives can influence markets mainly due to the following psychological mechanisms:

Fear of Missing Out (FOMO): Seeing others profit leads to fear of missing opportunities and blind following
Confirmation Bias: Focusing only on information that supports one's views and ignoring contradictory evidence
Herd Behavior: Following group behavior without independent thinking
Over-optimism: Overestimating potential returns and underestimating risks
Story Preference: Humans naturally love stories and easily believe in beautiful future visions

II. Metaverse Narrative: From Mania to Rationality

1. Narrative Emergence (2021-2022)

In 2021, Facebook's rebranding to Meta marked the full outbreak of the Metaverse narrative:

Tech giants announced Metaverse strategies one after another, investing heavily in R&D
Prices of Metaverse-related assets such as virtual land and NFTs surged
Stock prices of gaming companies and VR/AR device manufacturers rose significantly
Media and analysts were full of optimistic expectations about the Metaverse's future

2. Characteristics of the Mania Stage

The mania stage of the Metaverse narrative exhibited typical bubble characteristics:

Valuation Bubble: P/E ratios of Metaverse concept stocks far exceeded historical averages
Concept Hype: Many companies renamed or pivoted to Metaverse, with actual business lacking substance
Capital Inflow: Massive inflows of retail and institutional capital into Metaverse-related assets
Media Bombardment: Mainstream media and social media continuously reported Metaverse-related news
Excessive Expectations: Market expected Metaverse to achieve large-scale commercialization in the short term

3. Bubble Burst (2023-2024)

Starting in 2023, the Metaverse narrative gradually cooled, and the bubble burst:

Technological development fell short of expectations, and the Metaverse experience was far from the promotional effect
Commercialization progress was slow, lacking sustainable profit models
Meta and other tech giants cut Metaverse investments, shifting to AI and other fields
Prices of virtual land and NFTs fell significantly, with some assets declining over 90%
Investors began to question the long-term value of the Metaverse

4. Lessons from the Rational Stage

After the Metaverse bubble burst, the market entered a rational stage, bringing important lessons to investors:

Technology Maturity Takes Time: The Metaverse is a long-term vision, and large-scale commercialization is difficult to achieve in the short term
Focus on Fundamentals: Investment should be based on actual business and profitability, not concept hype
Diversified Investment: Avoid over-concentrating capital on a single concept or theme
Long-term Perspective: For promising technologies, track them long-term, but control position size and risk
Rational Analysis: Distinguish true innovation from concept hype, avoid being misled by narratives

III. AI Narrative: Technological Revolution or New Bubble?

1. Rise of AI Narrative (2022-2024)

At the end of 2022, the release of ChatGPT triggered a global AI boom:

Tech giants like OpenAI, Google, and Microsoft engaged in fierce competition in the AI field
Generative AI became an investment hotspot, with related company stock prices soaring
Demand for AI infrastructure such as AI chips, cloud computing, and data services surged
Various industries began exploring AI applications, with market expectations that AI would bring a productivity revolution

2. Differences Between AI and Metaverse Narratives

Compared to the Metaverse, the AI narrative has different characteristics:

Comparison Dimension	Metaverse	AI
Technology Maturity	Technology not mature, poor experience	Technology has achieved breakthroughs, rich application scenarios
Commercialization Progress	Lacking sustainable profit models	Already generating actual revenue and profits
Market Demand	Uncertain demand, low user acceptance	Clear demand, companies actively adopting
Investment Logic	Based on future vision, lacking fundamental support	Based on actual business and profitability
Risk Characteristics	High risk, high probability of bubble burst	Medium risk, need to guard against overvaluation

3. Risks and Opportunities in AI Investment

Although AI technology has huge potential, investors still need to guard against the following risks:

Valuation Risk: Valuations of AI concept stocks are at historical highs, with correction risk
Technology Risk: AI technology development may encounter bottlenecks, with progress falling short of expectations
Competition Risk: Fierce competition in the AI field, with market landscape possibly changing rapidly
Regulatory Risk: AI technology may face stricter regulation, affecting industry development
Ethical Risk: AI technology may raise ethical and social issues, affecting public acceptance

At the same time, AI investment also has huge opportunities:

Productivity Improvement: AI is expected to significantly improve productivity across industries
New Business Models: AI will spawn new business models and revenue sources
Long-term Growth: AI is a long-term trend with sustained growth potential
Quality Companies: AI companies with true technological advantages and commercial capabilities will stand out

IV. New Energy Narrative: Policy-Driven and Market Reality

1. Rise of New Energy Narrative (2020-2022)

Since 2020, New Energy has become a global investment hotspot:

Governments worldwide launched carbon neutrality policies, strongly supporting New Energy development
Electric Vehicle (EV) sales grew rapidly, with penetration rates continuously rising
Installed capacity of renewable energy such as photovoltaics and wind power increased significantly
Breakthroughs in New Energy technologies such as energy storage and hydrogen energy

2. Characteristics of New Energy Narrative

Compared to Metaverse and AI narratives, the New Energy narrative has the following characteristics:

Policy-Driven: New Energy development mainly relies on government policy and subsidy support
Long-term Trend: Carbon neutrality is a long-term goal, and New Energy is an inevitable choice
Certain Demand: New Energy demand is clear, with huge market space
Fierce Competition: Fierce competition in the New Energy field, with low profit margins
Cyclical Nature: The New Energy industry has obvious cyclical characteristics

3. Challenges in New Energy Investment

New Energy investment faces the following challenges:

Policy Risk: Changes in government policies may affect industry development
Technology Risk: New Energy technology is still developing, with uncertainty in technology routes
Competition Risk: Fierce competition in the New Energy field, with frequent price wars
Overcapacity: Some New Energy sectors have overcapacity, with falling prices
Raw Material Prices: Fluctuations in raw material prices such as lithium and cobalt affect costs

4. Strategies for New Energy Investment

For New Energy investment, the following strategies are recommended:

Focus on Leading Companies: Invest in leading companies with technological and cost advantages
Diversified Investment: Diversify investments across different sub-sectors to reduce single risk
Long-term Holding: New Energy is a long-term trend, suitable for long-term investment
Monitor Policy: Closely monitor government policy changes and adjust investment strategies in a timely manner
Reasonable Valuation: Buy when valuation is reasonable, avoid chasing highs

V. How to Identify Investment Narrative Cycles

1. Identifying the Emergence Stage

In the emergence stage of a narrative, investors can watch for the following signals:

A few forward-looking investors start positioning in related fields
Media coverage begins to increase, but hasn't become a mainstream topic yet
Related concept stocks start rising, but gains are relatively moderate
Analysts begin publishing research reports, but views are quite divided
Technology achieves breakthroughs, but commercial applications haven't started yet

2. Identifying the Diffusion Stage

In the diffusion stage of a narrative, investors can watch for the following signals:

Mainstream media begins reporting heavily on related themes
Related concept stocks continue rising, with gains expanding
Analyst views tend to converge, generally bullish
Companies announce entering related fields one after another
Investors start paying attention to related themes, with capital inflows increasing

3. Identifying the Mania Stage

In the mania stage of a narrative, investors can watch for the following signals:

Valuations of related concept stocks far exceed historical averages
Many companies rename or pivot, with actual business lacking substance
Massive inflows of retail and institutional capital, with trading volume surging
Media and social media continuously bombard, with sentiment reaching its peak
Market expectations are overly optimistic, ignoring risks

4. Identifying the Burst Stage

In the burst stage of a narrative, investors can watch for the following signals:

A gap appears between reality and expectations, with earnings falling short
Related concept stocks begin significant corrections
Negative news increases, with market sentiment weakening
Investors begin questioning the rationality of the narrative
Capital begins flowing out, with trading volume declining

5. Identifying the Rational Stage

In the rational stage of a narrative, investors can watch for the following signals:

Market returns to rationality, with valuations back to reasonable levels
Quality companies stand out, with sustained earnings growth
Industry enters healthy development, with clear competitive landscape
Investors start focusing on fundamentals, not concept hype
Long-term investors start positioning in quality companies

VI. Strategy Recommendations for Narrative Investing

1. Avoid Blind Following

Don't blindly follow just because you see others profiting
Think independently, don't be swayed by market sentiment
Focus on fundamentals, not concept hype
Control position size, avoid over-concentration

2. Identify Narrative Cycles

Learn to identify which stage the narrative is in
Participate moderately during emergence and diffusion stages
Stay cautious during mania stage, avoid chasing highs
Look for quality targets during burst and rational stages

3. Focus on Fundamentals

Investment should be based on actual business and profitability
Focus on company financial health and cash flow
Evaluate company competitiveness and moat
Avoid investing in concept companies without actual business

4. Diversified Investment

Diversify investments across different industries and themes
Avoid over-concentrating capital on a single concept
Balance high-risk and low-risk assets
Regularly adjust investment portfolio

5. Long-term Perspective

For promising technologies, track them long-term
Avoid short-term speculation, pursue long-term value
Maintain patience, wait for suitable buying opportunities
Continuously learn, improve investment capabilities

VII. Conclusion

Investment narratives are an important force influencing the market, but narrative-driven investments often come with bubble risks. By reviewing the rise and fall of hot investment narratives such as the Metaverse, AI, and New Energy, we can learn the following lessons:

Key Points:

Investment narratives usually go through five stages: emergence, diffusion, mania, burst, and rationality
Narrative-driven investments often come with valuation bubbles and risks
The Metaverse narrative is a typical bubble, the AI narrative has substantial content, and the New Energy narrative is a long-term trend
Identifying narrative cycles is crucial for investors
Avoid blind following, focus on fundamentals, diversify investments, maintain long-term perspective
True investment opportunities lie in identifying quality companies, not chasing hot concepts

Remember, investing is not about chasing hotspots, but about discovering value. In a narrative-driven market, maintaining rationality, independent thinking, and long-term perspective is key to long-term investment success.

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