Space X's record-breaking IPO tested the limits of an obscure financial metric, and Anthropic's could push it even further. The maker of Claude is likely to tell investors its potential revenue opportunities are above $30 trillion, topping Space X's $28.5 trillion estimate, according to people familiar with the matter. Tech startups often estimate their "total addressable markets," or TAMs, to show ample room to grow. These figures estimate annual revenue a company could theoretically capture with 100% market share, but are especially squishy with AI's rapid adoption.

Elon Musk's rocket maker called its TAM "the largest actionable" market in "human history" in a May filing, with most ($26.5 trillion) attributed to AI opportunities. Public markets have seen two acute TAM outbreaks: the late 1990s with electronics makers, and the mid-2010s when companies adopted tech argot to be valued like growth stocks. Bank analysts did the hype work in the first wave; companies became confident to TAM themselves in the second.

TAM is silly but useful because it can't be taken seriously. It's an estimate, not a projection, and a big TAM lets companies with no earnings pretend to be the next Amazon without promising it. As a New York district judge explained, "no reasonable investor would understand Adobe's TAM figures to represent that share of the market that Adobe would actually capture."

TAM inflation is inevitable. Reddit's 2024 IPO filing gives a $1.4tn total market value for digital advertising, plus a $1tn AI market and $2.1tn "User Economy," totaling $4.5tn—bigger than Japan's nominal GDP. Reddit's revenue last year was $2.3bn, or 0.05% of that total.