Liquid Capital Founder Yi Lihua Says AI Investment Should Focus on Star Companies

Liquid Capital founder Yi Lihua stated that the core of investment is not to spread risk widely but to identify a few "star companies" that can deliver excess returns. He views the current AI industry as being at a stage similar to the early days of the cryptocurrency sector.

Yi cited Duan Yongping's investment in NetEase as an example: in 2002, Duan invested about $2 million in NetEase shares, which were priced below $1 at the time. After holding the shares for about eight years, he achieved a return of over 100 times, making a profit of more than $260 million. This case illustrates that concentrating on a few high-growth companies, rather than broadly diversifying, can lead to extreme non-linear returns.

This statement reflects an investment viewpoint and does not represent Liquid Capital announcing a new fund, completed investments, a list of target companies, or performance disclosures. The public post did not specify the regions, targets, fund size, shareholding ratios, investment stages, exit cycles, or risk control frameworks for its AI investments.

Duan Yongping's investment in NetEase occurred after the internet bubble burst, during which NetEase faced a delisting crisis on NASDAQ, business transformation, and a general undervaluation of Chinese internet companies. NetEase later achieved a revaluation through growth in its online gaming business, but this outcome does not prove that replicating concentrated investments in the same industry or market will yield similar returns.

"AI is still in the early stages of explosion" is Yi Lihua's judgment on the technology cycle. There are significant internal differences in the AI market: the capital density, commercialization speed, competitive structure, and valuation logic of foundational models, chips, cloud computing, data centers, development tools, enterprise software, agents, and vertical applications vary greatly, thus "AI" cannot be viewed as a single tradable asset.

In terms of market mechanisms, the buyers of concentrated investments are venture capital and growth investors willing to bear high volatility, long cycles, and high failure rates. Funds will prioritize companies with technological barriers, data or distribution channels, customer retention, and scalable revenue capabilities. Beneficiaries will be companies that can become infrastructure standards, platform entry points, or industry workflows; those under pressure will be projects that rely on financing narratives, lack paying customers, or are quickly replicated by large companies' models and channels. The returns from star companies come from a concentration of winners, while the survival of a portfolio depends on the majority of incorrect judgments not causing unbearable principal losses.

Source: Public Information