MSFT is already valued at $1.7T (it’s the 3rd largest company in the world). What multiple do you think is realistic over the next 5-10 years? Or would you suggest call options? (If Microsoft owns 1⁄3 of OpenAI with this latest deal, that still only represents 0.6% of MSFT marketcap. Also OpenAI profits are meant to be capped at 100x; with that you’d only get a 1.6x on your MSFT.)
Tech as a whole went up a lot after COVID, then down in the last year or so. This helps demonstrate how much the entire sector can change in value.
(In addition, if a ton wealth went started valuing tech stocks higher, it would take less than $1 to raise the value of them by $1. Maybe much less than $1. A great deal of global “wealth” is really just “expectations of value or future earnings”. So as expectations rise, the S&P 500 and I believe “Global Wealth” would rise as well.)
In comparison, tech stocks might be valued at like ~$6T?
According to companiesmarketcap.com, Apple, Microsoft, Google and Amazon alone are worth $6 trillion. I am not familiar with an estimate of the total market size, but I suspect it is substantially higher than $6 trillion?
Sorry—I was thinking, and should have specific, about the FAANG stocks, plus maybe NVIDIA and one or two AI-specific companies. All of tech globally is significantly larger, though I think most of these companies likely won’t substantially compete in the AI race.
If Microsoft takes the lead among big tech companies then the market cap doubling in five years would be reasonable. Though its unclear they will pull that off. If timelines are fast and Microsoft stays in the lead 10T isn’t crazy. It’s also worth noting that even if the AI thesis doesn’t play out Microsoft is a 25PE blue chip with very capable management. So the downside here is pretty low as far as buying tech stocks goes. Buying call options requires getting the timing right.
MSFT is already valued at $1.7T (it’s the 3rd largest company in the world). What multiple do you think is realistic over the next 5-10 years? Or would you suggest call options? (If Microsoft owns 1⁄3 of OpenAI with this latest deal, that still only represents 0.6% of MSFT marketcap. Also OpenAI profits are meant to be capped at 100x; with that you’d only get a 1.6x on your MSFT.)
MSFT is valued at 1.7T using scenarios that don’t assume transformative AI.
If you really think TAI will happen soon, and think they will dominate, I think the EV of MSFT would go up much further.
How much further? And how much relative to the stock market as a whole?
The stock market as a whole could become significantly larger.
I just did a quick search:
- The total S&P 500 Market Cap is ~$33T
- Total Global Wealth is ~$460T
In comparison, FAANG tech stocks might be valued at like ~$6T?
[Edit: Changed “tech stocks” to “FAANG tech stocks”]
https://www.slickcharts.com/sp500/marketcap
https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html
Tech as a whole went up a lot after COVID, then down in the last year or so. This helps demonstrate how much the entire sector can change in value.
(In addition, if a ton wealth went started valuing tech stocks higher, it would take less than $1 to raise the value of them by $1. Maybe much less than $1. A great deal of global “wealth” is really just “expectations of value or future earnings”. So as expectations rise, the S&P 500 and I believe “Global Wealth” would rise as well.)
According to companiesmarketcap.com, Apple, Microsoft, Google and Amazon alone are worth $6 trillion. I am not familiar with an estimate of the total market size, but I suspect it is substantially higher than $6 trillion?
Sorry—I was thinking, and should have specific, about the FAANG stocks, plus maybe NVIDIA and one or two AI-specific companies. All of tech globally is significantly larger, though I think most of these companies likely won’t substantially compete in the AI race.
If Microsoft takes the lead among big tech companies then the market cap doubling in five years would be reasonable. Though its unclear they will pull that off. If timelines are fast and Microsoft stays in the lead 10T isn’t crazy. It’s also worth noting that even if the AI thesis doesn’t play out Microsoft is a 25PE blue chip with very capable management. So the downside here is pretty low as far as buying tech stocks goes. Buying call options requires getting the timing right.