Unveiling the M7 Titans: What is the Current Valuation Level? What Drives Revenue Growth?

Since 2015, MAG7 has consistently outperformed other mainstream indices, including the technology-heavy NASDAQ 100 Index and the S&P 500 Index.

As of a certain time, the market capitalization of the US tech giants stands at $15.41 trillion, surpassing the total scale of the stock markets in Japan, Canada, and the UK.

In terms of trading volume, from 2020 to 2023, NVIDIA was the most active; in the first half of 2024, Amazon leaped to the first place.

Tesla is the world's largest intelligent electric vehicle manufacturer.

Tesla launched the world's first pure electric vehicle (BEV) Roadster and has now become the world's largest electric vehicle manufacturer (as of 2023) and a leader in the energy storage sector.

Tesla's main business includes automotive (EV), energy generation and storage services, and services and other (including Full Self-Driving, FSD), with automotive being the primary revenue source, accounting for 88% of total revenue. By region, the United States accounts for 46.74%.

Tesla's gross margin level is maintained at about 19.84%, which is relatively high in the automotive industry. Additionally, Tesla's FSD intelligent driving subscription has innovated a change in the business model of the automotive industry, allowing automobile manufacturers to obtain profits not only through vehicle sales but also through intelligent driving and other service subscriptions.

Amazon:

As of 2023, Amazon is the world's largest cloud computing service provider, with Amazon Web Services (AWS). Among the top three global cloud providers, AWS has the highest capital expenditure at $13.353 billion, followed by Google at $11.019 billion, and Azure at $9.785 billion.

Amazon's main businesses include e-commerce and its self-operated logistics business Fulfillment by Amazon (FBA), and cloud computing business Amazon Web Services (AWS), with e-commerce accounting for 67%. From 2018 to 2023, the compound annual growth rate of revenue reached 20%, and the gross margin in 2023 was 6.4%.

The cloud computing business (AWS) contributes more than half of the operating income and has become a key driver of valuation. At the same time, in the increasingly fierce market competition, its traditional e-commerce business is still in the expansion period.

META owns the world's largest social media platform, operating mainstream user communities including Facebook, Instagram, WhatsApp, Messenger, Reels, Threads, etc., with an average daily active user base of about 3.3 billion people.

With its huge active user base, META has developed a mature advertising business. In addition, starting from 2014, it has been actively exploring VR business and has become the leader in the AR/VR headset market (with a market share of 64% as of 2023).

The main business is based on its huge social media user base, with advertising accounting for 99% of its annual revenue. The VR business - Reality Labs mainly includes Oculus VR products and related software application revenue.

Meta's gross margin and net profit margin are stable at a high level (81% and 29% respectively in 2023), especially after the cost reduction and efficiency improvement measures take effect. Looking forward, artificial

intelligence will accelerate the growth of advertising and virtual reality businesses.

From 2003 to 2023, Apple's stock price rose by about 40% per year on average, mainly driven by net profit growth, with revenue growth and profit margin expansion contributing about 20% each.

There are more than 2 billion active Apple devices worldwide, including 1.2-1.3 billion iPhones, accounting for 20-24% of the global 6 billion mobile phone users.

Apple's revenue comes from two parts - products and services: products (hardware) such as iPhone, Mac, Apple Watch, etc.; services (software) such as App Store, advertising, Appcare, iCloud, etc. Apple's product business is the fundamental source of revenue and profit, with the iPhone contributing nearly half of the gross margin.

The service business sector is Apple's significant advantage over other mobile phone brands and the largest contributor to Apple's profit growth over the past decade.

Its strong market position eventually led the company to offer a wide range of technology products covering computers, entertainment, enterprise cloud computing, and artificial intelligence. Microsoft is the world's largest computer software company and owns one of the world's largest public cloud providers - Azure.

Microsoft has three main business departments: productivity tools and business processes, including Offices, LinkedIn, Dynamics; intelligent cloud, including Azure; more personal computing, including Windows, devices, Xbox, search engines, and news advertising. Microsoft is the largest cloud manufacturer in the generative artificial intelligence field.

Cloud computing and productivity are the main drivers of profit growth, with higher operating profit margins (45% and 50% respectively).

Cloud artificial intelligence applications will accelerate the growth of core businesses such as Azure, Office, and Windows.

Google was established in 1998 and holds a 90% share in the global search engine market. It has also developed one of the world's best-selling mobile operating systems, Android.

Google has two core businesses: advertising services based on Google search and YouTube, and Google Cloud.

Its main revenue comes from advertising, accounting for 80% of its total business income. It also owns the world's leading video platform YouTube, with a market share of 30%. In 2023, Google Cloud's revenue increased by 26% year-on-year and achieved profitability for the first time in the first half of 2023, making a huge contribution to the company's overall growth.

With its forward-looking layout in edge to cloud computing and supercomputers, NVIDIA has become the largest beneficiary of the training and inference of new generation AI models and holds a dominant market share in the GPU field.

Data centers account for 85%, driven by the strong demand for training and inference of new generation artificial intelligence models and the continuous expansion of capital expenditures by cloud manufacturers.

The main products include GPUs based on Hopper architecture (H100, H200, H20) and GPUs based on Blackwell. Gaming accounts for 12%, in addition to traditional gaming GPUs, AI PCs are creating new demand. The main products include GeForce.

Automotive accounts for 1%, driven by the surge of new customers for autonomous driving platforms and the increasing demand for artificial intelligence cockpit solutions.

The main product is NVIDIA DRIVE Atlan. Thanks to its dominant position in the infrastructure computing field, NVIDIA has achieved record sales growth driven by strong growth in data centers.

The gross margin is still at a relatively high level (75.7%), and the gross margin for fiscal 2025 is expected to reach about 70%. The increased visibility of Blackwell and strong data center demand may be the main catalysts. NVIDIA's share in the data center computing market has increased from about 15% five years ago to about 80% today.

Valuation Level:

Looking back at historical bubble periods such as the US "Nifty Fifty" bubble in the 1960s, the Japanese financial bubble in the 1990s, and the tech bubble in the 2000s, the average forward price-to-earnings ratio was 34-67 times, much higher than the current 29 times of the seven giants (mainly pulled up by Tesla).