CNBC’s strategists advised that investors who are looking to invest in U.S.-based and Chinese internet giants need to be careful. These companies face a multitude of difficulties.

Investment bank Macquarie said large consumer tech companies like Facebook AmazonYou are currently in the “sunsetting” phase.

You need to exercise caution when approaching companies such as [Facebook-parent]Meta AlphabetThey are, according to me, sunsetting, just as I mentioned. They are suffering from many issues,” Viktor Shvets (head of Macquarie Capital’s Asian and global strategy), said. He named several other companies, including iPhone maker AppleChinese e-commerce platform Alibaba.

Shvets said that headwinds could include major economies of scale, as well as substantial political and social pressure. Shvets spoke on Thursday to CNBC’s “Street Signs Asia”.

These large platforms are dangerous, but they offer many opportunities for profit. [the]He stated that tech universe is his favorite.

Recent years have seen regulatory oversight of both American tech firms and Chinese giants.

Chinese authorities have taken steps to crack down on tech companies in China, and introduced legislation that covers everything from data protection to anti-monopoly.

Each share of Tencent, Alibaba and Didi sold off last year as the companies were caught in the regulatory crosshairs. The Hang Seng Tech index is still down more than 40% compared to a year ago, as of its Feb. 11 close.

In the U.S., President Joe Biden last year signed a new executive order aimed at cracking down on anti-competitive practices in Big Tech, among other sectors.

“One thing we have learned in those transitions — that only one or two companies actually make it through. So for example, Microsoft is really the only major technology company to move from first generation to second — pretty much nobody else [has] done that,” he said.

“So the question with those large digital platforms, which one of those companies do you think has the greatest opportunity or possibility or capacity to actually transit? And right now, it’s not clear. Should you bet on Meta, should you bet on Google, should you bet on [Alibaba]? It’s unclear.”

Shvets did not specify what the third-generation tech transition will entail, but the buzz around Web 3.0, or the next generation of the internet, started growing late last year.

Metaverse refers broadly to a virtual world where humans interact through three-dimensional avatars. In that space, users can engage in virtual activities such as gaming, concerts or live sports that can be controlled via virtual reality headsets or augmented reality gear.

Facebook-parent Meta, Apple, Microsoft and Google are gearing up to release new hardware products and software services for the metaverse.

Social networking giant Facebook changed its name to Meta late last year, reflecting the company’s growing ambition to embrace the future of the internet in a virtual world. However, the stock plunged in early February and recorded its largest one-day drop, after the company forecasted weaker-than-expected revenue growth in the next quarter.

Meta reported that its Reality Labs segment made $877 million in revenue in the fourth quarter with an operating loss of $3.3 billion.

“I still think … the biggest issue for the likes of Alibaba, Tencent in China is always the most ferociously competitive market in the emerging markets,” he told CNBC’s Pro Talks on Wednesday.

“The likes of Tencent’s 40% market share in social media advertising has gone to other players … in the past three or four years,” Snell said. “So that’s actually my biggest concern … the amount of competition that’s coming in. So we’ve been underweight … [keeping]The opportunities are elsewhere.”

He said, “Probably won’t be changing it in the future.”

— CNBC’s Laura Feiner contributed to this report.