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by rayiner 2 days ago
> AI companies would literally need the entire world as their TAM, using their services non stop to justify the valuations and level of expenditures we are seeing. What you describe is literally the symptoms of a bubble

That’s not true. Apple alone is valued higher than the largest three AI companies combined.
1 comments
dgellow 2 days ago
I don't see how that's related. Apple has high margin on the hardware they sell, extremely optimized logistics, they offer a whole ecosystem of hardware and services. They are in a completely different line of business than AI vendors
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rayiner 2 days ago
You said: "AI companies would literally need the entire world as their TAM, using their services non stop to justify the valuations and level of expenditures we are seeing."

You asserted that AI companies would need "the entire world as their TAM using their services non stop" to justify a few trillion in valuation. Yet Apple has a $5 trillion valuation just selling phones and computers, mostly to consumers and not businesses. Google built a $2 trillion valuation by the end of 2021 mainly on search and ads. Our economy is very large and you don't need to take over "the entire world" in order to justify a few companies with $1 trillion valuations.

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dgellow 2 days ago
You're mixing up a few things. A company valuation alone is irrelevant, you have to take in account the way it relates to the underlying business. In the case of both google and apple their valuation is mostly based on the fact that they own entire ecosystems and have consistently generated significant profits over decades. That's not the case of AI vendors. Their valuation is based solely on the belief they will eventually develop an actual business model.

Apple and alphabet are both trading at something like 10x revenue, with very high operating margins.

On the other hand you have AI vendors: OpenAI $852 valuation is ~34x revenue, with $14B losses projected for 2026. Their infra commitment through 2030 is more than $600B (that's on the low end of numbers floating around).

Just for the infra expenditure, if we assume a conservative ROIC of 5%, 8% operating margin: they need an operating profit of $30B/y, and a revenue of $375B/y. That's 100% of the projected 2030 AI infra market.

Edit: actually, their 2026 losses seem to be even higher, the $14B number is from a January leak, but more recent projections are at >$22B losses for 2025

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