The current emerging technologies can safely be assumed to be artificial intelligence, financial technology, Bitcoin and other cryptocurrencies in particular and cloud computing.
Based on my more than 15 years of experience analysing stocks I estimate that for small, mid capitalisation and large capitalisation companies in the businesses of artificial intelligence, financial technology, Bitcoin and other cryptocurrencies and cloud computing, the adequate revenue, Price/Sales multiples that is are 20, 12 and 7.
Yes, artificial intelligence, fin-tech and cloud computing stocks have seen their valuations reset in public markets, mainly on the Nasdaq and NYSE bourses since last November.
But corporations and individuals are inadvertently moving toward saving on the costs of producing goods and services. Currently, the fourth industrial revolution is under way driven by computer algorithms epitomised by artificial intelligence, AI, machine learning, fin-tech and cloud computing.
Yes, many of the small and mid-cap stocks in the AI, crypto and cloud verticals are burning cash, that is loosing money, but many of theme will survive and even thrive, because people simply want cheaper and cheaper goods and services. Wealth simply is not distributed evenly throughout the world and among individuals, so the only way to raise a two children middle class family in big metropolis cities is to make ends meet by buying reasonably priced goods. Translation: goods produced mainly in China and soon India and soon the production of these goods will be powered more and more by industrial automation.
Since technology is finding its way everywhere it is difficult to estimate how big is the actual market for many technology verticals, especially for artificial intelligence, financial technology, Bitcoin and other cryptocurrencies in particular and cloud computing.
This makes even the high Price/Revenue multiples stated in the beginning of this article seem not too high. And of course makes the valuation of AI, crypto and cloud companies all the more difficult, challenging and ultimately interesting.
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