I was heavily invested at Intel at $20/$30 when everyone said it was a dying company, and make a very good profit. Now I believe Intel is highly risky at these prices, so looking at my next investment. I have so far about 500k in Adobe at $220 price.
There have been dozens of posts made about Adobe valuation and math. So I won’t discuss that much but rather want to have a discussion about the future business itself.
1. Key risk of AI taking over
let’s take the case of AI taking over and doing all the creative work. Adobe has its own AI model that is specifically trained on licensed and fair use material. Why would companies use any other AI software when there is risk of copyright, lawsuits and competitor product placement in the material generated by AI.
If Agentic AI agents are doing the product marketing and creative work, why would those agents not utilize Adobe software. If marketing departments are scaled down from 10 to 1 person, reliable AI and software becomes even more valuable. Doesn’t that mean Adobe can charge even more?
2. Freemium strategy
The reduced ARR due to freemium strategy. I don’t think this purely by choice. If you look at the landscape and companies like google, Anthropic and ChatGPT, they are all loosing huge sums of money to offer free AI for the masses in hopes of later monetizing those users. These companies aren’t getting penalized for this but rather continue to have huge valuations. Why is Adobe any different here? They have to compete. If a non enterprise user is offered a free service from google or ChatGPT, they will use it over paying for Adobe. Therefore for non enterprise users, Adobe has to also do same. But at a certain point it will stop being free. Tokens will be consumed for all AI platforms for image generation, editing and etc.
At that point it becomes a question of cost and user familiarity. If users can spend 1/2 tokens and do some manual editing with photoshop, they will. Right now it’s essentially burn cash for user acquisition and data.
Anyways prove my thesis wrong.