Key insights
- The author argues that the rapid growth of AI companies like Anthropic, evidenced by its significant ARR increase, signals a massive market re-rating for AI stocks. The author believes the market is underestimating the potential return on investment in AI and that this growth will extend to OpenAI. This suggests a bullish outlook for AI-related equities, with potential for expanded multiples.
The read on AI by the market and the read on Reddit is generally wrong. Anthropic is at 30 billion in ARR right now, and at its current growth rate, it will comfortably exceed $100 billion in ARR in the next 12 months.
The concerns around investments have been completely valid, as there was an investment of hundreds of billions for maybe $20 billion in annual revenue. When the leading AI labs start to put up revenue numbers on par with the largest companies in the world, though, there aren't going to be any questions on whether or not they can meet their financing commitments.
The other thing I'm noticing is how many people don't understand what this means for OpenAI. I get it. People hate Sam Altman, and I cannot blame them, but this is a two-horse race. The numbers from one are a very good indicator of what the numbers for the other will be. There's no world where Anthropic reaches 100 billion in ARR. While OpenAI lags, it will also grow aggressively over the next year here, albeit perhaps more slowly.
When the market starts to realize that there will be a return on investment from the AI spending commitment, and a very high one at that, we're going to see a massive re-rating. We keep getting these lags in the market where it re-rates relative to the current numbers, and then people wait to see next year's numbers. Except we're already seeing next year's numbers three months into the year.
All I'm saying is I don't think we're going to have a second chance to load up on a lot of these AI companies after this year. Assuming we don't have WW3 in Iran, we're going to see a massive re-rating and expanded multiples likely for the foreseeable future.
To any bear, please explain to me how a company adding $10 billion a month to ARR is bearish lmao.