Matthews, who at a roadshow later this week will tell investors that the Internet bubble is already bursting one company at a time, said Macquarie Bank is telling its clients to "watch out and be very, very careful" when it comes to Net stocks.
"It is important to look at the capabilities a company has of making money in the future, and how fast they are burning cash at the moment," Matthews said.
While Matthews said some companies would find a long-term solution to bankruptcy by issuing new, discounted shares, or acquiring a profitable company, he said others were placing themselves under "tremendous pressure" by incurring increasing amounts of debt.
Matthews blamed the market and listing companies for over-priced Net stocks.
He said investors were playing the "greater fool" theory in which they purchased over-valued stock in an attempt to on-sell it to someone else willing to pay an even more inflated price. Other companies were simply over-hyped at the pre-IPO stage.
Matthews said there are major corrections already happening to individual Net stocks and cited the share prices of Yahoo! -- down from more than $US500 a share last year to approximately $US350 now -- and local online broker E*TRADE, whose shares peaked at almost $11 last year, but are now trading at less than three dollars.