Chainfeeds Summary:
Even if the market penetration rate of C-end has increased tenfold to 375 million people today, the valuation of the track at 24.4x P/S is still not cheap in any industry.
Article source:
https://x.com/Michael_Liu93/status/2001196429352821110
Article Author:
Honest Mr. Mai
Opinion:
Mr. Mai, the honest and straightforward CEO: Let's first roughly estimate the market size. Taking Chatgpt, which has the largest customer base, as an example, it currently has around 800 million monthly active users globally (already penetrating 10% of the global population). Among them, 35-40 million are paying users, let's take 37.5 million as the median. Most of these users spend $20 per month. Assuming an average monthly revenue of $25, Chatgpt's annual revenue from its consumer-facing (C-end) business is $11.25 billion. Assuming that each of these 37.5 million customers pays for at least 3 AI services on average, the total C-end market size is $33.75 billion. (I think an average of 3 is a very optimistic assumption. I myself am a heavy AI user, currently paying for only 3-4 AI products, around $100 per month). So, what is the market capitalization of the companies serving these AI C-end markets? Assuming we exclude the primary market (roughly estimated at around 1 trillion), and only consider the seven major tech giants in the secondary market (magnificent seven): Nvidia $4.4 trillion, Apple $3.9 trillion, Microsoft $3.7 trillion, Amazon $2.4 trillion, Google $2.4 trillion, Facebook $1.7 trillion, and Tesla $1.3 trillion. Except for Nvidia's $4.4 trillion market capitalization, which is purely AI-driven, the valuations of the others are more or less not centered on AI. Assuming we only use 25% as the weighting for their AI market capitalization (I believe the actual premium given to AI in the capital market is much higher than 25%, but for conservative estimates of a bubble, we'll use 25%), the result is $8.25 trillion (of course, there are many, many AI companies not included here, such as AMD, Palantir, Qualcomm, Oracle, etc.). $8.25 trillion divided by $33.75 billion = 244 times P/S. How do we understand the 244x PS ratio? We can refer to March 24, 2000, the peak of the dot-com bubble, and look at the P/S valuations of leading companies. Amazon: 19x. Cisco: 35x. Qualcomm: 22x. Microsoft: 26x. IBM: 3x. Oracle: 27x. Intel: 16x. After the dot-com bubble, most of these companies, even giants like Amazon and Microsoft, took 10-15 years to recover to their 2000 bubble peaks. Of course, 244x doesn't necessarily mean the AI sector is in a bubble, because most of the current AI revenue doesn't come from the $33.75 billion consumer market, but from spending money on infrastructure and graphics cards. Ultimately, these infrastructure and graphics card purchases are to serve the consumer market, which, at least for now, isn't as large as people think.
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