I thought the same when choosing to invest in Intel rather than NVidia in 2022. At the time, Intel was worth $310B while NVidia was worth $650B, yet Intel's revenue was $80B/year while NVidia's was $25B. I was like "There's no way I'm paying 2x the price for 1/3 the revenue." Now, NVidia is worth $4T (a return of roughly 7x) on revenue of $165B, and Intel is worth $105B (a return of roughly -66%) on revenue of $53B.

Investors are forward looking, and market conditions can change abruptly. If Anthropic actually displaces Google, it's amazingly cheap at 10% of Alphabet's market cap. (Ironically, I even knew that NVidia was displacing Intel at the time I invested, but figured that the magnitude of the transition couldn't possibly be worth the price differential. News flash: companies can go to zero, and be completely replaced by others, and when that happens their market caps just swap.)

So all it takes is Anthropic 35x-ing their revenue once they start selling ad spots? That sounds pretty reasonable to me.

Right now nobody wants to be the first to offer advertising in LLM services, but LLM conversation history provides a wealth of data for ad targeting. And in more permissive jurisdictions you can have the LLM deliver ads organically in the conversation or just shift the opinions and biases of the model through a short mention in the system message

Tech Companies are valued at a multiple of next 12 months revenue, not last 12 months revenue. Since anthropic grew from $1billion to $5billion in revenue in ~8 months, that means it ~10x'ed revenue y/y off of 1 billion base. If you assume even 60% of that growth is retained (low for traditional saas businesses, but who knows), then anthropic is ~10% of google in terms of revenue in mid ~2027.

Basically, 5x-ing revenue in 8 months off of a billion dollars starting revenue is insane. Growing this quickly at this scale breaks every traditional valuation metric.

(And no - this doesn't include margins or COGS).

> The company said its run-rate revenue has increased from around $1 billion at the beginning of 2025, to more than $5 billion in August.

So 10% of valuation for 1.5% of revenue, which grew 5x in last 6 months. Doesn't seem as unrealistic as you put it, if it has good gross margin which some expects to be 60%.

Also Google was valued at $350B when it had $5B revenue.[1]

[1]: https://companiesmarketcap.com/alphabet-google/marketcap/

Valuation includes expected future growth, it's not just present value of future revenue given today's numbers.

You may not agree with the market's estimation of that, but comparing just present revenue isn't really the right comparison.

How old was alphabet in 2024? And anthropic?

How much was google revenue in 2003? It was 1.5 billions (2.6 in today's USD)

Not saying the price is justified, but the comparison is not very fair.

It's just off by a factor of 35?

Someone mentioned their projected ARR for 2025 is 9b. Which makes sense intuitively looking at how much I spent with them this year. So the valuation looks a bit more sane with those numbers.

"Google’s advertising revenue in 2024 was about $264.6 billion"

Somebody above said that Anthropic might reach $9 billion ARR by the end of this year.

Here is another way to look at it: Anthropic is a put option on Google worth 10% of Google price. Expires when they run out of funds.

And that's not even looking at profits vs valuation...

The valuation is not based solely on last year's revenue. Revenue doesn't really matter at this point.

It's the techno-hubristic version of Pascal's wager. The reward for the existence of God is infinite, so it worth investing all the money in the world to create one.

> " If Anthropic's internal version of Claude Code gets so good that they can recreate all of google's products quickly"

I know you aren't asserting this but rather just putting the argument out there, but to me at least it's interesting comparing a company that has vendor lock-in and monopoly or duopoly status in various markets vs one that doesn't.

I'd argue that Google's products themselves haven't been their moat for decades -- their moat is "default search engine status" in the tiny number of Browsers That Matter (Arguably just Chrome and Mobile Safari), being entrenched as the main display ad network, duopoly status as an OS vendor (Android), and monopoly status on OS vendor for low-end education laptops (ChromeOS). If somehow those were all suddenly eliminated, I think Google would be orders of magnitude less valuable.

Is there no moat for previous account and user buy-in?

Convincing billions of users to make a new account and do all their e-mail on a new domain? A new YouTube channel with all new subscribers? Migrate all their google drive and AdSense accounts to another company, etc?

This is trivially simple and creates no moat?

To make a similar comparison, Alphabet's Waymo has AV's that actually work. But they're not capturing 80% of Tesla's valuation.