From Tencent and Circle: Simple and Difficult Questions in Investing

Author: Alex Xu; Source: X@xuxiaopengmint

The AI ​​narrative continues to ferment, but the recent performance of related stocks varies wildly, some like they're in the middle of summer, others like they're in the middle of winter.

The former is represented by Circle, the issuer of the largest compliant stablecoin USDC, while the latter is represented by Tencent.

Circle's rise has many reasons, such as the significant correction from 300 to 49, accumulating rebound momentum. Also, USDC's scale has recently rebounded, reaching a new high.

But the biggest driving force is probably the explosion of OpenClaw, which has shocked people with the Agents wave. This concrete impact has fueled the popularity of stablecoins considered very suitable for Agents settlement, and Circle is currently the only pure-play stablecoin among global listed companies.

The reasons for Tencent's decline are intriguing. Previously criticized for its slow progress in the AI ​​era, its stock price had been steadily declining from a high of 680. Even after a strong earnings report and a statement at the earnings conference that it would "reduce share buybacks and increase AI investment," the stock price fell further. Market concerns about its AI investment have shifted from "insufficient" to "excessive." So, in the AI ​​era, which company, Tencent or Circle, has more certainty? Charlie Munger once said that investing shouldn't involve solving difficult problems. His exact words were: "One of our secrets is not trying to understand too much… I constantly categorize things as 'too difficult.' Occasionally, an easy decision comes along, and I do it. That's my system: most things are categorized as 'too difficult,' and only a few obviously simple decisions are dealt with immediately." So, between Tencent and Circle, which is the easy problem on our investment table, and which is the difficult one? Let's start with Tencent. Currently, Yuanbao AI within WeChat is essentially an experimental form of WeChat's future proprietary agent: It can already perform most of the most frequent AI tasks for ordinary users, namely: querying and answering questions. However, currently, Yuanbao can only interact with content-based information within WeChat, such as text and images, video content, and WeChat official accounts. At this stage, it cannot directly interact with mini-programs. However, it's not difficult to predict the form of WeChat's native agent: through natural language dialogue, we can directly instruct WeChat's agent to call mini-programs to perform various tasks, including ordering takeout, booking hotels, summarizing videos and recording audio, reminding schedules, and reporting work. Mini-programs themselves constitute a huge application ecosystem; most of our commonly used apps have mini-program versions: Didi Chuxing, Meituan, Pinduoduo, McDonald's, Lalamove, WPS, and even Alibaba's Xianyu and Ele.me. More importantly, WeChat's agent has extremely strong system-level permissions for mini-programs, similar to (or even stronger than) Apple's permissions for iOS ecosystem software; mini-program development must adhere to WeChat's specifications. WeChat's agent will not be directly blocked by major apps like Doubao Mobile Assistant, remaining outside the "walled garden" of its ecosystem. Instead, it will interact with various mini-programs at the system level. All apps, large and small, will inevitably embrace WeChat's official agent to provide better services to users. Compared to OpenClaw, which is still generating buzz but has been a frustrating experience for many early adopters and has led many ordinary users to give up after initial attempts, WeChat's agent, targeting 1.4 billion users, will undoubtedly have better usability and practicality. This will be the true meaning of "nationwide agent promotion." This form may not be as geeky or cool, but it's a product usable by 90% of the general public. The launch of this agent product at some point in the future is highly certain. However, until it happens and everyone sees it, with Tencent's stock price still falling, the market is reluctant to price it. But for value investors, the market is something we need to utilize. We should invest in things that have a high probability of happening, or even are inevitable, but haven't happened yet. Facing the highly uncertain AI era, is Tencent's operational certainty really that low? I think it's alright. Is buying/holding Tencent at this time an easy or difficult question? I think it's far easier than market sentiment suggests. Now, let's talk about Circle: Looking at some things in the long run, the certainty is actually quite vague. Will Circle's future business scale be able to smoothly grow to hundreds of billions, or even trillions? Optimistic bullish voices believe it's possible, their logic being: 1. AI is the future, and future agents will be the main users of the internet, dominating a massive scale of online transactions. 2. AI transactions will use stablecoins based on blockchain settlement. 3. USDC is currently the largest compliant stablecoin, and the settlement needs of AI will directly drive the growth of USDC's scale. 4. Stablecoins have strong network effects, and the expansion of scale will be self-reinforcing. 5. The scale of USDC will grow in tandem with the scale of AI transactions, reaching trillions or even more. This chain of reasoning seems airtight, but several important links actually have considerable uncertainties: 1. The future Will agents be the main users of the internet and dominate the massive scale of online transactions? Looking at this highly certain point in the long run, let's move on. 2. Will AI transactions use stablecoins? Not necessarily. As everyone can see from the first point, existing payment infrastructure service providers and internet and AI giants that control users are also pushing their own standards, many of which are not based on blockchain, such as Google's UCP protocol for agency commerce. 3. Is USDC the largest compliant stablecoin? Currently it is, but Tether also has significant power and is attempting to become compliant, with considerable political resources. There are also many other eager Trafi financial groups and payment providers like PayPal. 4. Do stablecoins have strong network effects? In the face of ruthless agents, the differentiation of stablecoins will be compressed. As long as they can all be used for payment, agents will choose the one with the lowest friction and fees. Whether it's USD1, USDT, USDC, or a stablecoin issued by a particular bank? It doesn't matter. You say USDC currently has more merchant-side resources? Payment gateway providers like Visa and Stripe have merchant networks and channels far exceeding Circle's, and can also help other stablecoins integrate. As long as settlement is convenient and friction is low, merchants don't care which stablecoin they receive. The network effect of stablecoins may not be so strong in the agent-dominated payment era. 5. Will the scale of USDC grow to trillions in tandem with the transaction scale of AI? When assumptions 2-4 are all highly uncertain, and are combined to derive conclusion 5, the uncertainty becomes blurred. In the face of the highly uncertain AI era, is Circle's operational certainty really that high? I think it's alright. Is buying/holding Circle at this time an easy or difficult question? I think it's far more difficult than market sentiment reflects. This is just my personal opinion, for reference only.