Chinese internet stocks are classic lazy buys. The logic is as follows: the country has a low national internet penetration rate of 34 per cent, well short of Japan (78) or South Korea (81). Bandwidth is getting cheaper. Ergo, any internet company with a decent market share now is bound to get bigger and more profitable.

That reasoning supports the valuation of Youku, China’s leading video site, with a 37 per cent share of browsing time and 14 per cent of ad revenues. Since its New York initial public offering at $12.80 a share in December, the stock has more than tripled. Investors seem not to care that Youku makes no money or that management will not say when it will. The assumption is that growth in internet penetration, viewing hours and revenue-per-minute will, over time, outpace the growth in costs for bandwidth, server depreciation and content amortisation. (Never mind that Youku’s net loss actually widened last year.) Analysts expect the company to make 24 cents of net income per share in 2013, putting Youku on a multiple of 173 times that year’s earnings as at the close on Monday.

Even that modest earnings target could be a stretch. Founded in June 2006, some 16 months after YouTube of the US, Youku has since shifted from sourcing content from its users to making it itself or buying it from big media groups. Content costs were a fifth of net revenues last year, up from about a 10th in 2009.