There's no denying that creator economy and omni-channel commerce are on the rise.
Cloud providers provide the picks and shovels for this new world in the making.
Participating in this could be a wise investment. Let's explore.

$AMZN $MSFT $GOOG $BABA

World GDP :
* In 2020, the GDP of all the nations combined is about $113T.
* The GDP has grown at about 5% per annum for the past 25 years.
* If we assume the same growth going forward for another 10 years, we would get to $184T.
https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/

IT Expense :
* Obviously IT spend is going vary by industry. Financial services spend much more on IT than say Manufacturing.
* Let's assume 5% of all revenues are spent on IT based on across all globe.
* That would bring the global IT spend to $9.2T.
https://www.statista.com/statistics/1105798/it-spending-share-revenue-by-industry/

Infra vs Payroll :
I've worked in small startups and big tech. Based on my experience, I did a rough back of the napkin calculation to arrive at the following expenditure splits :
* Infrastructure : 20%
* IT Payroll : 80%

That would bring Infrastructure spend to 1.8T by 2030.

Cloud Adoption :
* I honestly don't know what the cloud adoption % currently. But let's assume that by 2030, 75% of all software running on planet earth, runs on Cloud.
* That's 1.3T in revenues for the IaaS Cloud industry.

Moats :
* Cloud IaaS is sticky business. Changing Cloud vendors would take years for completion and most migrations fail. Given that, I'm going to assume that the top 4 IaaS players are still going to be dominant in 2030. https://twitter.com/retaox/status/1354206868613300229?s=20

Big 4 :
* Top 4 IaaS Cloud providers: AWS, Azure, GCP, Alibaba Cloud.

* Let's assume these top 4 players take 75% of market share. As a basket, their revenues would be $1T by 2030.

Looking at big tech, it's fair to assume 20% FCF margin --> $200B in free cash flows in 2030.

Valuation :
* Cloud businesses are high quality businesses that have huge moats to protect them. 20 times FCF is a fair price to pay for them.
* That brings the market cap of the basket of 4 Cloud providers to 4T by 2030. https://twitter.com/retaox/status/1354209270145945602?s=20

Let's look at the current revenues made by these 4.
* AWS : $54B
* Azure : $30B
* GCP : $16B
* Alibaba Cloud : $3B

Total : $103B https://twitter.com/jaminball/status/1387865236389040128?s=20

Currently, on average, these units are trading for 10 times revenue, if we back out the non-cloud business at fair valuation.
So if you are buying the basket 4 Cloud companies today, you are paying $1T.

For the above basket.
* $1T in 2020 ---> $4T in 2030.
That's 15% IRR.

Caveats :
* The thesis only works if the non-cloud businesses at least pull the same weight in terms of growth. Which may or may not be true.
* Some assumption are either really bold or stupid. If you think so, let me know. I'm certainly not an expert.

These names are no stranger to #fintwit.

Tagging @shomikghosh21 @_ram_ @jaminball @trengriffin @JerryCap @libertyrpf. Insights much appreciated.

For more context around non-cloud revenues :

H/T @JGreenwald86 https://twitter.com/NavyguyJP/status/1387720188901089281?s=19