Coatue’s 2024 EMW Conference

https://drive.google.com/file/d/184tgms_70fL5P0b1l83qSXk8vpFr4kfl/view

Key takeaway

• For entrepreneurs: AI is driving significant market opportunities, but scaling to $10B+ valuations is crucial for successful IPOs.
• For investors: AI companies are outperforming, but caution is needed in private markets outside AI sectors.

Summary

Coatue's EMW 2024 conference highlighted AI's dominant role in driving market returns and shaping investment strategies. The public markets showed resilience, with AI companies significantly outperforming non-AI counterparts. In private markets, AI funding is accelerating while overall VC funding normalizes. The conference also addressed challenges in the IPO market and alternative exit strategies for unicorns.

Insights

• AI has been responsible for 90% of S&P500 YTD returns, with AI companies showing 20% median returns vs. 2% for non-AI companies.
• NVIDIA's valuation reached $3 trillion, trading at a 39x P/E multiple, which is not considered a bubble compared to historical tech booms.
• Software valuations are at near all-time lows, with growth expectations declining due to market saturation and AI investments crowding out traditional software budgets.
• Private AI company funding has grown 100% since EMW 2023, but many non-AI unicorns are struggling to raise new capital or exit.
• The IPO market remains tight, with only a handful of tech IPOs in recent years compared to the boom in 2020-2021.

Implications

• Entrepreneurs need to focus on building proprietary data, workflows, and knowledge graphs as code alone is no longer a sufficient moat.
• Investors should be cautious of overvaluation in private markets, especially for non-AI companies.
• Companies aiming for IPOs may need to achieve $10B+ valuations and $1B+ in high-margin revenues to be viable in public markets.
• M&A and PE buyouts may become more attractive exit options for unicorns unable to reach the scale required for successful IPOs.
• The shift towards natural language interfaces in software may require new pricing models, moving away from seat-based to consumption and value-based pricing.

Coatue EMW 2024 - Keynote