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AI is already changing our world.
But that doesn’t mean the companies building it will make you money.
I’ve been thinking a lot about how big tech’s spending on AI is changing their business models, and what the implications could be.
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The Mag 7 were wonderful businesses
Many of the businesses in the Magnificent 7 have been historically wonderful businesses.
They’ve steadily grown revenue at very attractive rates:
Meta is the fastest here with a 33% CAGR
Apple is the laggard at a still attractive 11%
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They’ve grown their profits just as fast.
Google leads here at 32% (!) per year
Apple is again the slowest at 22% per year
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Nearly all of that profit has historically been turned into cash.
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They’ve been capital light businesses.
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That management has been able to reinvest in at high rates of return.