Anthropic's Insane Valuation + The Future of Marketing

**Scott Galloway** (0:01)
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All right, let's get into it. Our first question comes from Steve, who emailed us. He asks, I'm a simpleton in investing who listens to Prof G regularly. I know both are different sectors, but can someone explain how Walmart with revenues of approximately 713 billion and operating profit of around 30 billion, can have a lower valuation than Anthropic, which has revenue of approximately 70 billion and forecast a profit of around 2.2 billion? Is it forecasting revenue of 70 billion? Is that evidence of a bubble? Are investors simply pricing a much higher future growth and profitability for Anthropic? So typically a stock price is meant to be the asset value, so just the land underneath the retail or the intellectual property and ons plus the present value of growth opportunity or cash flow. So all of these assets should be able to create an asset or a series of assets that create revenue that is greater than the inputs to produce that revenue, that's profits. And then your growth or the multiple you get on those earnings, the PE ratio is a function usually of how fast that is growing or how stable and durable those cash flows are. The reason why SpaceX and Anthropic and OpenAI are going out at anywhere from 30 or 40 times revenues to 100 times revenues is that people look at the addressable market and think, wow, if this company continues to grow in fairly short order, it could be the most valuable company in the world. And right now, if you are buying in any of these three companies, there is your betting and non-zero probability that this could in fact be the most valuable company in the world because these companies are going out at anywhere between one and two trillion dollars and the most valuable company in the world, I think is around five or five and a half. I can't remember if it's Nvidia or Apple. So you do end up with companies that are low growth, not exciting, not in software, don't have the margins of technology. The addressable market for Walmart is pretty big. I think it has a nine or 11 percent share of retail. It's probably never going to get above 20 because consumers like at some point differentiation and want to shop at different places or regional friction, whatever it might be. But let's talk about TAM. I think Anthropic is five or 10xing every year. So people look at that and think, wow, that could be an enormous company at some point. Because it is in fact software at some point, when it hits break even, a lot of those additional revenues are going to flow to the bottom line. So what's the takeaway here? Let's look at the numbers. Fiscal 2025 net sales of 675 million at Walmart, adjusted operating income of 30 billion, operating margin of 4.4%. And the market cap as of late was $1 trillion.