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## Highlight:

1）With strong performance (GMV 29.50 billion yuan, net profit margin of 20.27%, 6440 stores), Chagee went public in the United States, trying to become a pioneer in the internationalization of Chinese tea beverage brands through the "cultural going global" strategy and localized production.

2）MIXUE successfully occupied the Non-Major market with the model of "supply chain is hegemony" (97% of revenue comes from the supply chain, and 12-hour cold chain covers 90% of the country), proving that the low-price strategy is backed by extreme supply chain management capabilities.

3）Starbucks China is trapped in the dilemma of "defending the third space" (market share drops by 8%), facing the dual challenges of losing pricing power and cultural generation gap, reflecting that Chinese tea beverage brands are restructuring the industry and have the voice over.



The IPO of Chagee is imminent, with the stock code "CHA". As a leader in new tea drinks, it has shown remarkable growth data: GMV increased by 173% YoY to 29.50 billion yuan in 2024, Net Profit rate of 20.27% led the industry, and the number of stores increased nearly 6 times to 6440 within two years.

Behind this impressive data, there are three important insights from Chagee:

The perfect balance between scale and standardization
Chagee successfully solved the biggest pain point in the tea industry: how to maintain quality during rapid expansion. The ultra-low store closure rate of 1.5% proves the success of its standardized operation system, breaking the industry curse of "scale and quality cannot be achieved at the same time".

Urban strategic transformation of new tea drinks
While competitors are still focusing on the Non-Major market, Chagee has already established more than 3,000 stores in first- and second-tier cities. This "reverse penetration" strategy not only enhances the brand tone, but also lays the foundation for future internationalization.

Globalization touchstone for Chinese consumer brands
Against the backdrop of tense Sino-US relations and stricter regulation, the choice of Chagee to go public in the US is of symbolic significance. Its concept of "cultural going global" and localized production strategy may provide a new paradigm for the internationalization of Chinese consumer brands.

The IPO of Chagee is not only a financing activity, but also an important milestone for Chinese consumer brands to go global. Its success or failure will affect the internationalization process of the entire Chinese tea beverage industry and provide important reference for the overseas expansion of other Chinese consumer brands.

In this article, the RockFlow investment research team will provide you with an in-depth analysis of the grand cultural capital export experiment of Chagee. And compare MIXUE and Starbucks China, two important players in the freshly made beverage market, to take you through the quietly changing situation of China's tea beverage consumption market.



## Overlord Exiting Yunnan: Capital Narrative Experiment of Cultural Capital Globalization


From the tea aroma of Kunming Old Street to the Trading Desk on Wall Street, Chagee completed a commercial civilization leap in 7 years.

This tea brand, which started in Yunnan, is emerging in the global market at an astonishing speed. While MIXUE is building fortresses with 5 yuan lemonade in rural markets, Chagee is trying to compile Chinese tea culture into a universal code for global Capital Markets.

Founded by Zhang Junjie in 2017, Chagee opened its first store in Yunnan Province and has since rapidly expanded in China and even overseas. The tea brand had sales of 29.50 billion yuan (4.03 billion USD) last year. Behind the lightning layout of 6,440 stores in 2024 is its ambition to compile "Chinese tea culture" into the language of global capital.

![1.png](https://web-cdn.rockflow.tech/broker-cms/1_2dc6672aa1.png)

It plans to serve customers in 100 countries, selling 15 billion cups a year and aggressively expanding its global presence. In recent years, it has expanded into South East Asia, entering MY, Singapore and Thailand.

Unlike MIXUE's supply chain monster model, Chagee is considered the "Starbucks of the tea industry", embodying the essence of Starbucks from Visual Identity to store layout, product strategy, and brand story. Essentially, they are Starbucks' Eastern counterparts.

Currently, the GMV of Chagee has surpassed Starbucks China (3 billion USD), while the profit margin is equivalent to Starbucks' 16%. Such impressive performance is likely to enhance its confidence in going public in the United States.

However, the expansion of Chagee is not without challenges. With more than 3,000 stores in first- and second-tier cities, how to maintain a low store closure rate (currently 1.5%) without affecting sales has become its main problem.

The IPO of Chagee is not only an action of Capital Markets, but also an attempt to export culture. By listing on NASDAQ, Chagee hopes to promote Chinese tea culture globally. However, in the face of fierce competition from competitors such as MIXUE, it remains to be seen whether Chagee can continue to maintain its leading position in the international market.

In addition, the stock code "CHA" of Chagee indicates that their ambition is not limited to selling milk tea, but also extends to promoting Chinese tea culture globally. Pearl milk tea itself may not be special, but Chinese tea cultural heritage is an intangible and scarce asset that gives brand power.

If Chinese tea culture is successfully spread to all parts of the world through the pearl milk tea brand, will Chinese tea brands also enjoy a high reputation globally? After all, China produces half of the world's tea, but there is still no truly influential Chinese tea brand.



## MIXUE: The Non-Major Market Dialectics of Supply Chain Empires


MIXUE, a tea brand that started in Zhengzhou, Henan, is known for its strong supply chain management capabilities and extreme cost control. Since its establishment in 1997, MIXUE has become one of the largest catering chain enterprises in the world, with more than 45,000 stores.

In the fireworks of the urban village in Zhengzhou, brothers Zhang Hongchao and Zhang Hongfu proved the truth of "supply chain is hegemony" in 27 years. When the outside world was amazed by the grassroots counterattack of 1 yuan ice cream, what really deserves to be included in business school textbooks are two core data.

97% of revenue comes from the supply chain
12-Hour cold chain direct access to stores, covering 90% of China's territory 

The Zhang brothers realized the importance of the supply chain in the catering industry early on. Since 2007, MIXUE has been establishing raw material factories in the suburbs of Zhengzhou, although initially these factories only processed ice cream powder and waffle cones. In 2012, they expanded their scale and built a larger core raw material production factory - not only producing ice cream, but also producing beverage products. Later, they even began to grow their own fruits, striving to have full control from agricultural planting to internal processing.

![2.jpeg](https://web-cdn.rockflow.tech/broker-cms/2_dc95ec6aaf.jpeg)

In addition, since 2014, MIXUE has continuously invested in logistics operations to ensure that franchisees receive materials with the lowest cost and shortest delay. As of 2023, MIXUE has established 26 main warehouses nationwide, serving stores covering 31 provinces across the country, and has achieved over 90% of domestic store cold chain logistics coverage.

MIXUE is trying to replicate its success in the global market and has established localization warehousing systems in four countries in South East Asia, including seven self-operated warehouses, to support its globalization strategy.

Interestingly, with such a strong supply chain, MIXUE does not have high requirements for franchisees. It mainly earns revenue by providing raw materials and equipment (accounting for 97%) to franchisees, rather than charging high franchise fees or sharing.

This "heavy back-end, light front-end" model allows MIXUE to maximize the advantages of vertical integration of the back-end, while rapidly expanding its product line at low prices and establishing a sustained win-win relationship with franchisees.

Due to the fact that MIXUE's products are generally much cheaper than their peers, with most products priced at only 5 to 8 yuan, almost half of their competitors' congeneric products, many people believe that their success is due to their low-price strategy. In fact, this is only superficial. Their real secret lies in extreme supply chain management, which ensures profitability and enables large-scale replication at ultra-low prices.

This empire, which rose from rural areas in Henan, essentially used the "countryside surrounding the city" of the township market to complete the supply chain counterattack against Western fast-moving consumer goods giants. Although many people regard MIXUE as a company similar to Pinduoduo due to its low-price image, in fact, it is more like Coca-Cola or McDonald's. It maintains a cost-leading position through a strong Competitive Edge (self-controlled supply chain and scale advantage), which competitors cannot replicate.

Based on the GMV in 2023, MIXUE is the largest freshly made beverage company in China and the fourth largest in the world. The company's market share in China is about 11.3% and its global market share is about 2.2%.

From 2021 to 2023, the compound annual growth rate of MIXUE's revenue reached 40.05%. As of the end of the third quarter of 2024, the revenue increased by 21.1% YoY, reaching 18.70 billion yuan. This growth data is better than competitors such as Chabaidao and Guming. However, compared with 2021-2023, the revenue growth in 2024 has slowed down.

In addition, MIXUE's low-price strategy may also face challenges. In terms of Product Research & Development, MIXUE's investment is much lower than that of its competitors, which may lead to its lack of product innovation. In addition, although it has achieved certain success in the South East Asia market, further exploration is needed on how to replicate this model in a wider international market. Especially in supply chain management and product localization, MIXUE needs more investment and innovation.



## Starbucks China: The Darkest Moment of the Third Space Defense War


![3.png](https://web-cdn.rockflow.tech/broker-cms/3_7f250953cb.png)

Everything stems from lost pricing power and shattered elite narratives.

Starbucks China is facing unprecedented challenges. With the rise of local brands, Starbucks' market share has been declining year by year. By 2024, its market share has declined by 8%, facing fierce market competition and loss of pricing power.

Starbucks' dilemma is that its traditional brand positioning and pricing strategy can no longer meet the needs of the new generation of consumers. With the rise of Generation Z consumers, Starbucks needs to re-examine its brand perception and product strategy to cope with the constantly changing market environment.

In addition, Starbucks also faces challenges in supply chain management and product localization. With the continuous innovation of local brands in these areas, Starbucks needs to accelerate its pace to maintain its market competitiveness.

Starbucks is actively promoting digital transformation to meet market challenges. However, the implementation of the digital strategy is not smooth. Although the proportion of Mini Program orders has increased, the Operational Efficiency of stores is decreasing.

Starbucks' management team in China also faces challenges. Although the new CEO has rich experience in digitalization and consulting, he lacks experience in operating brick and mortar stores, which may limit its strategic implementation in the Chinese market.

Starbucks needs to find a balance between digital transformation and brick and mortar store operations to respond to the rapidly changing market and diverse needs of consumers.

Under the anxious gaze of the Seattle headquarters, Starbucks is experiencing the most dangerous moment in its 25-year history in China. The current digital reform is not so much a strategic upgrade as it is a difficult compromise on the belief in the "third space" - when Tyrant Tea Lady used the "CHA" promotional video to build a cultural utopia, Starbucks was forced to distribute discount coupons between Meituan LIVE.

Starbucks is currently facing two structural dilemmas:

Pricing anchor break: Although Luckin Coffee's price war has eased, the 12-20 yuan price band has been completely divided by local brands
Generation Z prefers to pay a premium for "Chinese tea culture" rather than American elite narrative

If CHA code can really conquer Wall Street with Chinese tea culture, are the traditional tea merchants lurking in the Longjing Village of West Lake and the tea fields of Wuyi Mountain witnessing the historic migration of the category has the voice over? The answer may be hidden in Zhang Junjie's wildness - when 15 billion cups of "Modern Oriental Tea" flow down the global throat every year, who still remembers which continent Starbucks' coffee beans come from?



## The final battle: the reconstruction of the world system of freshly made beverages

In the global freshly made beverage market, Chagee, MIXUE, and Starbucks represent three different forms of commercial civilization. Chagee has achieved global expansion of the brand through cultural capital and extreme efficiency; MIXUE has occupied a dominant market position through strong supply chain management and low-price strategies; while Starbucks is trying to defend its market position in the third space through digital transformation and brand reshaping.

The collision and integration of these three business models will profoundly affect the future pattern of the global freshly made beverage market. With the continuous changes in consumer demand and the intensification of market competition, finding a balance between cultural empowerment, supply chain management, and brand positioning will become the key to corporate success.

Looking to the future, the global freshly made beverage market will present the following possibilities:

Scenario 1: Through its strong cultural output and brand influence, Chagee has further expanded in the international market and become the leader in the global tea beverage market.
Scenario 2: MIXUE replicates its successful model in more international markets through its strong supply chain management and cost control capabilities, further consolidating its market position.
Scenario 3: Starbucks regained its leadership position in China through digital transformation and rebranding.


## Conclusion


When Chagee IPO on NASDAQ, Zhang Junjie may think of the clouds and mist drifting over Yunnan Tea Mountain - which is not only the starting point of business wisdom, but also the origin of civilization output. This war that began with milk tea will eventually evolve into the ultimate competition of different forms of commercial civilization.

The MIXUE logistics vehicle shuttling through the Zhengzhou warehouse and the anxious Starbucks executives at the Seattle headquarters are witnessing the power shift in the world of tea beverage consumer goods.

The IPO of Chagee is imminent, with the stock code "CHA".The RockFlow investment research team will provide you with an in-depth analysis. 

Chagee goes public, MIXUE doubles, is China's new tea drink expected to surpass Starbucks?




## Highlight:

1）DeepSeek claims to train models at one-tenth the cost of GPT-4, causing concerns about the collapse of computing power demand. However, "underwater demands" such as MultiModal Machine Learning models and real-time inference are gradually emerging, coupled with the acceleration of Model Iteration, which has instead pushed up the long-term demand for computing power in the market.

2）In addition to the explosive data given in previous financial reports, NVIDIA's true Competitive Edge is hidden in the ecological barrier built by 280 million lines of CUDA code. Its software stack advantage has formed an industry standard, and the migration cost is extremely high. Even if the hardware performance of competitors is close, the software ecosystem gap is still difficult to bridge.

3）Current data proves that although DeepSeek's breakthrough is significant, no tech giant has cut capital expenditures in computing and data centers. The upcoming Q4 2024 financial report may once again boost investor sentiment. It is expected that Nvidia's revenue in 2025 will remain extremely optimistic, and new highlights will be revealed at the GTC conference on March 17th (focusing on physical AI projects such as GB300, Rubin, and robots).


## Introduction

On January 27, 2025, the US stock market witnessed a historic scene: NVIDIA plummeted 17% in a single day, with a market value evaporation of $590 billion, setting a record for the largest single-day market value loss in the history of the US stock market.

The epicenter of this earthquake came from a Chinese AI company, DeepSeek. It claimed to have trained a model with equivalent performance at one-tenth of the cost of GPT-4, instantly tearing apart the consensus on the market's demand for AI computing power.

But what's even more dramatic is that in less than a month, NVIDIA's stock price has basically recovered all lost ground. The bulls who remain optimistic and choose bottom fishing have bought low again.

RockFlow's research team believes that behind this NVIDIA roller coaster ride, the market's overreaction to short-term sentiment is reflected, and the subsequent rebound verifies the irreplaceability of its core competitiveness and industry position. In August last year, we analyzed the true Competitive Edge of NVIDIA that the market has not yet paid enough attention to, and why we believe that NVIDIA is not only a great company, but also an investment target with high potential returns.

This article will deeply review why the 590 billion dollar flash crash was misjudged, as well as the long-term reasons and short-term catalysts for our optimism about NVIDIA.


## The essence of market panic: misjudging the technical path and demand structure


The release of DeepSeek R1 model is like a "bomb" thrown at the computing power market: it can be trained with only 2000 H800 GPUs and costs 6 million dollars, compared with GPT-4 which costs as much as 100 million dollars, and Llama 3 which uses 16000 H100. This order of magnitude of cost difference makes the market suddenly fall into the panic of "computing power demand collapse theory".

Some investors mistakenly believe that improving model efficiency will directly reduce reliance on NVIDIA GPUs, leading to short-term pressure on its stock price.

![1.png](https://web-cdn.rockflow.tech/broker-cms/1_67874f8df1.png)

However, there is a misjudgment point here - the illusion of cost accounting. In fact, 6 million only covers the cost of GPU leasing and electricity, while the real training cost also includes many implicit expenses such as data cleaning, algorithm engineer salaries, and experimental losses. Research firm Semianalysis pointed out that if the full cost is included, DeepSeek's actual expenditure may reach the level of 30 million dollars.

More importantly, market panics have overlooked the "iceberg structure" of AI computing power demand: the current Model Training demand is only visible and may only account for 10%, while the underwater part includes exponential growth in computing power consumption of MultiModal Machine Learning models (video/3D generation), rigid requirements for low-latency hardware for real-time inference needs (such as Tesla's autonomous driving), and repetitive training needs brought about by the acceleration of Model Iteration speed.

The real disruptive aspect of DeepSeek this time is that its open-source strategy (free and open R1 model) directly challenges OpenAI's subscription system ($20-200/month), causing turmoil in the AIaaS valuation system. In addition, it may also lead to the diversion of the long-tail market, especially for small and medium-sized developers who may turn to cost-effective solutions such as Trainium 2, but NVIDIA's core customers (large-scale data centers) are difficult to migrate due to CUDA ecosystem binding.

Overall, there are two core logics for misjudging short-term market panic:

On one hand, although model optimization (such as sparse computing and algorithm improvement) reduces training costs, the acceleration of large-scale Model Iteration (such as MultiModal Machine Learning and real-time learning) actually increases the total long-term computing power demand.

Secondly, underestimating the resilience of NVIDIA's demand structure: core customers are concentrated in cloud vendors (AWS, Azure) and leading AI companies (OpenAI, Meta), and its capital expenditure plan is centered on "infrastructure expansion" rather than simply pursuing single-task costs.


## NVIDIA's rebound driving force: fundamentals and ecological barriers


When the market is boiling for DeepSeek, don't forget the reality revealed by NVIDIA's Q3 2024 financial report: Hopper architecture chips (H200) are taking over data centers at the fastest speed in history. The core highlights of the last quarter's financial report include but are not limited to:

Data center revenue: $30.80 billion (+ 112% YoY), with Cloud as a Service Provider (CSP) contributing over 50%
Blackwell demand: The first batch of samples sparked a buying frenzy, Huang Renxun said "demand exceeds the most optimistic expectations"
Profit margin game: Although Blackwell's initial gross profit margin dropped to 75% in mass production, it will recover to the middle of 75% as production capacity climbs

![2.jpeg](https://web-cdn.rockflow.tech/broker-cms/2_05343675b6.jpeg)

Hopper's outstanding sales in the third quarter helped the Data Center Division's revenue grow 112% year-over-year to $30.80 billion. CFO Colette Kress said on the earnings call:

The sales of H200 have grown continuously to billions of dollars, making it the fastest-growing product in the company's history. The inference performance of H200 has increased by 2 times, and the TCO has increased by 50%. Cloud as a Service provider accounts for about half of the sales of Data Center, and the revenue has increased by more than 2 times year-on-year.

Now, AWS, CoreWeave, and Microsoft Azure all offer cloud instances based on NVIDIA H200, and Google Cloud and OCI (Oracle Cloud Infrastructure) are about to be launched. In addition to the significant growth of large CSPs, as North America, EMEA, and the Asia-Pacific region increase the construction of NVIDIA cloud instances and sovereign clouds, NVIDIA GPU regional cloud revenue has doubled year-on-year.

In addition to CSP, NVIDIA also receives more than double the revenue from consumer internet companies that purchase Hopper chips to support the training of next-generation AI models, multimodal and proxy AI, deep learning recommendation engines, generative AI, and content creation.

Kress stated during the financial report conference call that the company has delivered the first batch of Blackwell samples to customers in the third quarter. Blackwell is its latest architecture series, and due to its powerful performance, there is a high demand for it. Two or three years ago, it took weeks or even months to train large AI models on hardware, but Blackwell can greatly shorten this time. In the rapidly developing AI industry, the faster developers bring innovative products to market, the greater the chance of success.

Management forecasts total revenue of $37.50 billion for Q4. If this expectation is met, Q4 revenue will increase by 69.7% YoY, and full-year revenue in 2024 will increase by 111% compared to 2023, reaching $128.66 billion.

In addition to the explosive data given in previous financial reports, NVIDIA's true Competitive Edge is hidden in the ecological barrier built by 280 million lines of CUDA code. Its software stack advantages: CUDA and AI libraries (such as TensorRT) have formed industry standards, and the migration cost is extremely high. Even if competitors (such as AMD) have similar hardware performance, the software ecosystem gap is still difficult to bridge.

In addition, NVIDIA's system-level solutions (such as DGX SuperPOD, OVX servers, and other full-stack solutions) have been deeply bound to customer infrastructure, replacing the need to reconstruct the entire technology stack. This ecological control was further strengthened in the Blackwell era: its NVLink 5.0 Technology Implementation ultra-high-speed chip interconnection bandwidth is several times that of AMD MI300X. When the hardware performance gap exceeds a certain critical point, the cost-effectiveness loses its discussion significance.

NVIDIA was originally a hardware company that produced GPUs. However, it is developing into a company that provides end-to-end AI solutions. It provides software tools for customers to build chatbots, AI virtual assistants, and virtual agents. This is not just a chip provider, but a mature AI giant.

![3.png](https://web-cdn.rockflow.tech/broker-cms/3_bf5b479361.png)

It also emphasizes the total cost of ownership (TCO) of its entire AI infrastructure solution, rather than just focusing on manufacturing chips, which makes it harder for competitors who only sell cost-effective chips to compete. NVIDIA includes the entire hardware and software ecosystem, support, operating expenses, and the ability to quickly deploy AI solutions in its TCO calculation. Management hopes to tell customers, "Our AI chips may have higher upfront costs, but in the long run, the entire AI solution can save costs."

Therefore, although DeepSeek and the trend of reducing AI costs pose a certain threat to Nvidia, Nvidia does not need to worry too much.


## The "arms dealer" logic of AI competition remains unchanged


The current theme of tech giants is that business growth is still limited by the ability to establish data centers and provide computing power. None of them have cut capital expenditures in computing and data centers. Moreover, their growth in Cloud Services remains strong.

In the past 12 months, the top three CSPs have invested $186 billion to expand their computing power. In the new year, Meta expects capital expenditures of $600- 65 billion, Microsoft expects to invest about $80 billion to expand its data center, Amazon sets a tone of at least $100 billion, and Alphabet expects capital expenditures to reach $75 billion.

Meanwhile, the recently launched "Stargate" project claims to cost $500 billion and aims to promote the development of US AI. Oracle alone has identified 100 data centers for future development. In the field of physical AI, Tesla completed the assembly of 50,000 H100 clusters at the Texas Gigafactory in 2024, which will be used for autonomous driving. Musk said that the computing power of the Optimus humanoid robot needs to be increased by 10 times.

Morgan Stanley research director Vishwanath Tirupattur believes that although DeepSeek's breakthrough is significant, it will not lead to a collapse in capital expenditures of giants with significant influence in AI and related fields.

He mentioned that the sharp decline in computing costs in the 1990s provided a useful reference for this. At that time, the investment boom was mainly driven by two factors: the speed at which companies replaced depreciation capital, and the sustained and significant decline in computing capital prices relative to output prices. If the efficiency improvements brought by DeepSeek reflect similar phenomena, then the cost of AI capital may decrease and support the expenditure prospects of companies.

Tech giants continue to increase spending, undoubtedly providing strong support for computing companies such as Nvidia. Amazon CEO Andy Jassy pointed out in a conference call that most companies rely on Nvidia's chips for AI computing, and in the foreseeable future, Amazon will continue to maintain a cooperative relationship with Nvidia.

Not to mention, Huang has repeatedly stated last year that countries around the world are planning to build and operate their own AI infrastructure domestically, which will drive demand for NVIDIA products.

He emphasized in an interview with Bloomberg that countries such as India, Japan, France, and Canada are discussing the importance of investing in "sovereign AI capabilities". "Their natural resources - data - should be refined and produced for their countries. The recognition of sovereign AI capabilities is global."

Of course, it needs to be acknowledged that as US tech giants firmly invest heavily in the AI field, NVIDIA is also facing increasing uncertainties: for example, the two AI ASIC giants that have benefited the most recently are Broadcom and Mywell Technology.

With their technological leadership in chip-to-chip communication and high-speed data transmission, Broadcom and Mywell Technology have become the core forces in the AI ASIC market. Tech giants such as Microsoft, Amazon, Google, and Meta are collaborating with Broadcom or Mywell Technology to develop their own AI ASIC chips for massive inference AI computing deployment.

In addition, according to Reuters, OpenAI is advancing plans to reduce its reliance on NVIDIA by developing its first generation of internal artificial intelligence chips, opening up a new chapter in its chip supply. Sources said it will complete the design of its first internal chip in the coming months and plans to send it to TSMC for manufacturing. The latest news shows that OpenAI is expected to achieve its mass production goal by 2026.

However, these factors do not hinder NVIDIA's AI competition "arms dealer" logic, and the selling caused by NVIDIA believers shouting DeepSeek is a bottom fishing opportunity. They still believe in three supporting factors.

Currently, the market's confidence in Hopper and Blackwell chips is constantly increasing.
Although investors are under pressure for large training clusters, there are signs that large clusters are still under construction.
The inference market is expected to drive NVIDIA's growth for many years, and NVIDIA's position in the inference field is solid.

In the short term, the upcoming Q4 2024 financial report may once again boost investor sentiment. It is expected that NVIDIA will reconfirm Blackwell's execution; Data Center 2025 revenue will increase by more than 60% year-on-year; and NVIDIA will build momentum for the GTC conference on March 17th (focusing on physical AI projects such as GB300, Rubin, and robots).


## Conclusion


The RockFlow research team believes that the DeepSeek impact event will eventually be recorded in the history of technology, not because it changed the rules of the game, but because it verified the unshakable nature of the rules: in the infinite war of AI, computing power is not an option, but a must; it is not a cost item, but an asset item.

As the "infrastructure provider" of the global AI arms race, NVIDIA's irreplaceability will continue to strengthen during the industry expansion cycle. Despite the long-term disturbance caused by ASIC and self-developed chips, NVIDIA will still be the biggest winner in the AI computing power expansion cycle in the next 3-5 years.

When the market cheered for the "efficiency revolution", NVIDIA proved in a month that true Competitive Edge is never in the gross profit margin numbers of financial statements, but in the "import torch.cuda" command typed by every developer, in the roaring DGX SuperPOD of every Data center, and in the eternal desire of human beings to expand the boundaries of intelligence.

It deeply review why the 590 billion dollar flash crash was misjudged, as well as the long-term reasons and short-term catalysts for our optimism about NVIDIA.

NVIDIA 590 billion flash crash and rebound: How DeepSeek caused AI computing power misjudgment? 

An in-depth analysis of nuclear energy, and take stock of the investment value of old giants and emerging companies in the nuclear energy concept stocks.

The trillion-dollar nuclear energy track, which 10x stocks will be born?





Highlight:

1）This round of gold bull market is driven by Geopolitical Risk Premium, central bank gold purchases, and monetary easing policies. The proportion of global central bank gold reserves has doubled in the past decade, reflecting structural doubts about the US dollar system. Frequent geopolitical conflicts have pushed up safe-haven demand, laying the foundation for long-term gold allocation logic.

2）Although the gold price has reached a new high, there is still significant room for upward movement: its actual purchasing power adjusted for inflation is only 40% of its peak in 1980; market indicators show that there is still a significant gap in the current holdings of gold ETFs compared to the peak period. Therefore, the central bank's gold purchase trend combined with the rigid support of mineral costs has clear upward movement space for gold and controllable downward pressure.

3）RockFlow research team believes that investors can flexibly layout through gold ETFs (low fees + high liquidity), gold mining stocks (leverage effect), etc. Gold has unique value in investment portfolios: volatility absorber (78% probability of positive return when stocks and bonds double kill), inflation transmitter (three-year hedging effectiveness 0.86), and it is also the ultimate payment medium in the transformation of the monetary system.



The most striking phenomenon in the global Financial Market in 2024 is that the price of gold continues to break through historical highs. The price of gold denominated in US dollars has risen by 40% in one year, soaring from $1,861 to $2,642, marking the strongest annual performance since the collapse of the Bretton Woods system in 1971.

RockFlow investment research team believes that this round of gold bull market is not a random short-term fluctuation, but the result of multiple structural factors driving together. This article will systematically analyze the operating logic of the gold market, analyze its core value as a strategic asset allocation, and provide you with specific strategies for investing in gold and investment research stock orders.


# How to understand the value and price of gold?


The gold price denominated in US dollars is continuously breaking through historical highs, which is a continuation of the potential upward trend of gold and the long-term bull market. The strength of global gold prices also echoes and confirms this point. In recent weeks, the global gold price index of 14 currencies with equal weight has broken through new highs.

![1.JPEG](https://web-cdn.rockflow.tech/broker-cms/1_02d559dc88.JPEG)

For the past few hundred years, gold has been a timeless choice for inflation reasons. It is difficult to say that gold itself has obvious "intrinsic value", but it does have some characteristics: scarcity, corrosion resistance, easy division, and no depreciation. Currently, the total global gold inventory exceeds 200,000 tons, which is negligible compared to the annual mining volume of 5,000 tons.

Even if there is a small mismatch between gold supply and demand in a given year, the increase in mining volume does not necessarily affect the gold price. For the gold price, what matters is what the current owners of 200,000 tons of inventory are doing.

Most owners believe that gold is a store of value. And it keeps pace with inflation, at least in the long run.

Here is a chart of gold prices in US dollars:

![2.jpeg](https://web-cdn.rockflow.tech/broker-cms/2_00d32fa021.jpeg)

Before 1933, the price of gold was fixed at $20 per ounce, later at $35. In 1971, the US dollar was removed from the gold standard, and gold became a floating asset. Since 1971, the price of gold has risen sharply at a compound annual growth rate of 7.8% per year.

In fact, this does not mean that gold has become more valuable, it just reflects the continuous depreciation of the US dollar denominated in gold. The chart below shows that since the US left the Gold standard in 1971, gold has well protected capital from the impact of inflation - its long-term return rate has almost matched the performance of the S & P 500 index.

![3.jpeg](https://web-cdn.rockflow.tech/broker-cms/3_ef2d3b0970.jpeg)

In short, gold can be seen as a "currency" that does not provide returns but can resist inflation in the long run. In the medium term, it continues to benefit from lower interest rates and higher inflation. It will also play a role in diversification and hedging during periods of extreme volatility.


# Several driving factors for the rise in gold


In terms of factors driving gold's strength, several factors are at play, with the recent key factor being the surge in geopolitical risks.

Taking the recent tariff risk that caused a huge shock in the US stock market as an example, previously, the US tariff policy had stimulated a surge in COMEX gold inventory (people avoided the risk of physical gold Import Tariff by transferring gold from London to the US). Overall, as the geopolitical norms of the past few decades give way to a new era of international relations, geopolitical Risk Premium is being continuously factored into the gold price.

Another major driver driving the continued rise in gold prices is central bank reserve diversification (i.e. central bank purchases). Over the past decade, global central bank reserves have doubled their allocation to gold, which is likely to be a long-term trend given concerns about US fiscal sustainability and geopolitical (sanctions risk).

Central banks around the world have purchased a large amount of gold as part of their foreign exchange reserve diversification. Since 2020, the share of the US dollar in total foreign exchange reserves has decreased by 2.5%, due to various reasons such as the improvement of Financial Marekt and payment infrastructure in many countries, potential sanction risks, escalating geopolitical tensions, and fluctuations in US financial conditions.

Therefore, many central banks are increasingly interested in gold and hope to continue increasing its share in their foreign exchange reserves. The following chart illustrates how central banks' global gold reserves increase as the share of the US dollar in foreign exchange reserves decreases.

![4.jpeg](https://web-cdn.rockflow.tech/broker-cms/4_d4d8d2817d.jpeg)

It is worth noting that central banks around the world are cautious participants in the gold market. Their purchases are usually not very active, but diversifying foreign exchange reserves takes years or even decades. Due to various considerations, central banks around the world have decided to further diversify their foreign exchange reserves, and there may be sustained buying in the gold market.

In addition, central banks around the world have provided additional impetus to the gold price through emergency interest rate cuts, expansion of M2 money supply, and loose monetary policy tendencies. These trends often last for many years and are difficult to suddenly reverse. In other words, the current main driving factors of the gold bull market may continue.


# Is the rise in gold too strong?


With the continuous rise of gold prices, the most concerning question for investors is: 'Is it too late to enter the market now?'

The RockFlow research team believes that these questions should only be asked when you have seen a truly strong upward trend in gold. The current increase is not the first time, as gold has experienced more sustained and violent rises in the past. The following chart summarizes the price performance of the gold bull market in four periods: 1972, 1978, 2007, and 2024. In comparison, the gold bull market in 2024 (red curve) is still in its early stages and has not yet passed the halfway point.

![5.jpeg](https://web-cdn.rockflow.tech/broker-cms/5_4ccf19b7ea.jpeg)

In addition, regarding the issue of entry timing, it may be better to break it down into the following to better address concerns:

First of all, is gold overvalued now? The answer is slightly overvalued, but the comprehensive valuation index is still far below the peak level in recent decades, so there is still room for growth.

Secondly, have all the potential bulls on gold entered the market? Data shows that ETF funds related to gold are still flowing out, and the allocation of retail investors is still very low, so there is still room for growth.

Also, is the monetary easing policy turning? Obviously not, key cyclical and thematic drivers show no signs of weakening; therefore, gold still has room to rise.

Overall, there is currently nothing that can stop the further development of the long-term bull market in gold.


# How to invest in gold easily and simply?


There are four main ways to obtain gold exposure: physical assets, ETFs, futures, and gold mining stocks. The RockFlow research team will discuss these options one by one.

## Physical gold (gold bars or gold nuggets)
 
Historically, the most popular way to obtain gold was to purchase physical gold bars or nuggets. However, the problem with gold bars is storage costs and security risks. The storage cost of third-party facilities is about 0.5% per year. If stored at home, there is a risk of theft and insurance costs are expensive.

In addition, physical gold is also at risk of being requisitioned. For example, in the 1940s, the Nazi government looted gold from individuals and banks in the occupied countries. The same was true during the Nationalist government in the 1940s, when it forced holders of precious metals to exchange it for legal tender.

## Gold ETF

One of the simplest ways to gain exposure to gold is to buy a gold ETF. It is a financial product based on gold assets that tracks the price of gold and can achieve similar returns to gold, while trading is very convenient.

The operating principle of gold ETF is: consignment of physical gold by large gold producers to fund companies, and then the fund company relies on this physical gold to publicly publish fund shares on the exchange and sell them to various investors. Commercial banks act as fund custodians and physical custodians, and investors can redeem them freely during the fund's existence.

Compared to physical gold, the advantage of gold ETFs lies in their low transaction costs. Investors who purchase gold ETFs can waive the storage fees, storage fees, and insurance fees for gold, and only need to pay a management fee of 0.3% to 0.4%. Compared to the average fees of 2% to 3% for other gold investment channels, the advantages are very prominent. In addition, gold ETFs also have the advantages of safe storage and strong liquidity.

The following four low-cost US gold ETFs can meet the different needs of investors:

GLD: Established in November 2004, it is the oldest and largest gold ETF in the US, so its liquidity is quite good, the bid-ask spread is very small, and its options market is more active than any other traditional gold fund. The only downside is that the fund has a relatively high expense ratio of 0.40%.

IAU: The second largest gold ETF in US assets, established in early 2005, represents the equity of physical gold like GLD. Its liquidity is not as good as GLD, and the bid-ask spread is not small, making it not an ideal choice for short-term trading. However, IAU has a lower Cost Of Carry ratio of 0.25%, making it suitable for long-term holding.

GDX: In addition to investing in physical gold ETFs, gold mining stock ETFs are also an option. GDX holds stocks of about 50 gold miners and can track the stock performance of gold producers. However, it should be noted that the price volatility of gold stocks is higher than that of gold, so GDX is more suitable for holding during the gold bull market and short-term trading. Its expense ratio is slightly higher, at 0.51%.

GDXJ: Among gold miners, junior miners engaged in gold exploration have greater risks than traditional miners, but also greater upward potential. If you are willing to pursue higher returns and take more risks, GDXJ is very suitable for you. GDXJ invests in nearly 100 gold mining companies, which is a good way to diversify risks. Its fee rate is also slightly higher, at 0.52%.

## Gold futures

Gold futures are usually suitable for gold producers themselves or large financial institutions. For example, if a producer wants to lock in future prices, it can sell forward futures and profit from the difference between that price and the spot price at maturity.

Futures trading allows for greater leverage, but there is a risk of additional margin. It is not very suitable for ordinary investors.

## Gold mining stocks

Another indirect way to gain exposure to gold is to buy gold mining stocks - companies that mine metals from underground and sell them. The stock price performance of gold mining stocks is often several times that of gold prices. If the gold price rises, the operating leverage will ensure that the profits of gold mining companies grow faster. Some of them also offer annual dividends. Junior miners engaged in gold exploration have greater risks than traditional miners, but also greater upward potential, suitable for investors who pursue higher returns and are willing to take more risks.

When examining gold mining stocks, investors need to understand the "Lassonde curve". This curve illustrates the journey that junior miners may go through in various stages of development from exploration to production. When a new mine is discovered, the stock price usually rises; when capital is used for actual construction, the stock price falls; when the mine is nearing completion, the stock price rises again.

![8.jpeg](https://web-cdn.rockflow.tech/broker-cms/8_9d181b4361.jpeg)

Unlike the price of gold, the performance of gold mining stocks is not continuously rising. Especially in 2021, the performance of gold mining stocks is contrary to the price of gold, but with the current situation of continuous strengthening of gold prices and increasing geopolitical risks, the growth of gold mining stocks is worth looking forward to.

In addition, from the perspective of valuation, the current discount of gold mining stocks is the largest since the Internet bubble. Therefore, this sector can serve as an alternative hedging or risk diversification tool to cope with the volatile market of the US stock market. At the same time, if the gold price rises further, this sector will also benefit. The RockFlow investment research team believes that this is a combination of defensive and upward potential.

# Conclusion

The RockFlow research team believes that in the current era of a century of changes in the fiat currency system, gold is returning to the center stage of the financial system from a marginal asset. Its value storage function beyond sovereign credit, natural properties of resisting currency depreciation, and ultimate payment ability in extreme risks constitute irreplaceable strategic allocation value.

For rational investors, gold is not only a safe haven against storms, but also an important means of participating in global wealth redistribution. In the upcoming restructuring of the monetary order, gold will become a stable wealth anchor.

This article will systematically analyze the operating logic of the gold market, analyze its core value as a strategic asset allocation.

How to seize the epic opportunity of gold with a 40% surge in 2024?



## Highlight:

1）The rise of Robinhood's encryption business is due to three major advantages accumulated by the company over the years: a large young user base established from a zero commission model, infrastructure and technological strength behind product innovation, and user investment habits cultivated during the Meme stock boom.

2）Recent quarterly financial reports show that Robinhood's share price rise in 2024 is inseparable from the better-than-expected recovery of the crypto business. In particular, crypto revenue surged 165% year-on-year to $61 million in the third quarter of 2024, which together with options trading became the twin engines of the company's revenue growth.

3）Looking to the future, Robinhood's layout in the European Union and United Kingdom markets, coupled with its core user group (millennials and Generation Z) being the most active participants in crypto, as well as the regulatory relaxation trend of Trump's new policy and the potential benefits of encryption, will bring considerable growth space to its encryption business.



In the 24-hour sleepless trading frenzy of the crypto market, a name is being mentioned by more and more investors - Robinhood. This fintech platform founded by two Stanford students not only leveraged traditional Wall Street with a zero-commission model, but also created a new world in the crypto field.

When Baiju Bhatt and Vlad Tenev persisted in their dreams after 75 financing failures, they may not have imagined that Robinhood would eventually become a key bridge connecting traditional finance with cryptoassets.

RockFlow has previously provided detailed introductions to Robinhood's past development history, GME events, and order flow payment (PFOF). In this article, RockFlow's investment research team will delve into the core of its crypto business, explore the reasons for its stock price surge of 383% in the past year, and analyze its current investment value and future bullish catalysts in detail.


## Three waves of growth have laid the groundwork for the rise of encryption


The unexpected development of Robinhood's encryption business is not accidental. Three revolutionary waves have gradually built a strong user base and product innovation capabilities, laying a solid foundation for its later takeoff in the encryption business.

Robinhood initially entered the market with a zero commission model, breaking the commission barrier of traditional securities firms of $8-10. By canceling the minimum deposit requirement and supporting fragmented stock trading, it successfully attracted a large number of young users and established their initial trust in the platform. This has accumulated a valuable user base for expanding innovative businesses such as encryption in the future.

In the second wave of growth, Robinhood demonstrated outstanding product innovation capabilities. By incorporating gamification elements into the trading experience, creating a simple and intuitive interface design, and combining it with an attractive stock reward mechanism, the platform achieved amazing growth. During this period, the trading volume reached 9 times that of E-Trade, and the trading volume of option contracts reached 88 times that of Jiaxin Wealth Management, proving its strong technical strength and Operation Product ability. These abilities were later successfully applied to the development of encrypted trading products.

In the third wave of growth, Robinhood played a core role in the Meme stock and crypto frenzy. The platform became the main battlefield for trading popular stocks such as GameStop and AMC, as well as cryptocurrencies such as Dogecoin. In January 2021, it set a record for the number of new accounts opened in a single month exceeding the total of all other securities firms. This period not only brought a large number of active users, but more importantly, cultivated users' investment habits in emerging asset classes.

Robinhood's three revolutionary waves of user growth not only changed the landscape of the securities industry, but also reshaped the entire investment culture. Under its influence, retail investors have risen to account for 20% of all trading volume. The younger generation has begun to view investment as part of their lifestyle, and this concept has created a favorable environment for the popularization of innovative financial products such as crypto.

These accumulated advantages - a huge user base, strong technical capabilities, mature operational experience, and profound influence on investment culture - together constitute the cornerstone of Robinhood's success in the crypto field.


## Crypto revenue continues to skyrocket, driving Robinhood's stock price to double


With the gradual recovery of the crypto market since 2023, Robinhood has also benefited from it. In its recent quarterly financial reports, the proportion of crypto revenue has gradually increased. The following chart shows Robinhood's revenue situation in the past 9 quarters, with particularly notable increases in option revenue and crypto revenue.

![1.5.png](https://web-cdn.rockflow.tech/broker-cms/1_5_726878833e.png)

Taking the recently released Q3 2024 financial report as an example, crypto revenue surged 165% YoY to $61 million, demonstrating an amazing growth momentum. This achievement not only confirms the company's strategic vision in the crypto field, but also demonstrates its excellent execution in the process of business expansion.

![2.jpeg](https://web-cdn.rockflow.tech/broker-cms/2_b612ef9188.jpeg)

Robinhood's revenue mainly comes from three sectors: trading revenue, net interest income, and other income. Among them, trading revenue increased by 72% year-on-year to reach $319 million, while the crypto business became one of the most dazzling sectors with a year-on-year growth rate of 165%. This achievement, together with options trading revenue ($202 million), constitutes the dual engines of the company's revenue growth.

Robinhood has not ignored the robustness of the business while growing rapidly. Net interest income increased by 9% year-on-year to $274 million, providing the company with stable cash flow. Innovative services such as Gold subscriptions drove other revenue growth by 42% to $44 million, and 2.20 million's premium client base proves users' recognition of platform services.

In addition, the platform achieved a net deposit of over 10 billion USD for the third consecutive quarter, highlighting the high level of trust users have in Robinhood. This trust not only supports the development of traditional businesses, but also provides a solid foundation for the expansion of innovative businesses such as crypto.

It is worth noting that while pursuing high-speed growth, Robinhood still maintains prudent cost control and expects full-year 2024 operating expenses to remain in the range of 18.5-19 50 million dollars. This strategy of balancing growth and efficiency provides a guarantee for the continuous development of innovative businesses such as encryption.

From this financial report, it is clear that Robinhood is gradually transforming from a traditional zero-commission trading platform to a comprehensive fintech platform with crypto as an important growth pole. The outstanding performance of its encryption business not only brings considerable revenue growth to the company, but also indicates its broad prospects in the new era of encryption.


## Why is Robinhood still worth looking forward to in 2025?


Despite Robinhood's stock price having risen by 383% in the past year, the RockFlow investment research team is still optimistic about its performance in 2025 based on its unique market opportunities. This confidence largely comes from its active layout in the crypto field.


Robinhood's core client base is mainly concentrated among millennials and Generation Z, who happen to be the most active participants in crypto. As the wealth of the older generation transfers to the younger generation, these assets are likely to flow to platforms that better meet the investment needs of the new generation. As a bridge connecting traditional finance and crypto innovation, Robinhood will reap significant benefits from this wealth transfer.

In addition, Robinhood's international expansion strategy particularly emphasizes the importance of crypto business: European Union market: actively layout European Union crypto business, making it an important pivot for Internationalization; United Kingdom market: develop business in the City of London, laying the foundation for the future expansion of crypto services.

Finally, Robinhood has strengthened its crypto business competitiveness through various measures: for example, its futures trading infrastructure can provide technical support for future crypto derivatives trading; Gold membership services are expected to provide users with more crypto-related privileges; continuously optimized trading interfaces and services can also increase user participation in crypto trading.

Overall, Robinhood's crypto business development reflects a clear global mindset and innovation orientation. By integrating traditional finance and crypto services, the company is building a more inclusive financial ecosystem. Its layout in the European market, especially the expansion of crypto business, demonstrates the company's long-term development determination in the crypto field. With the continuous maturity of the global crypto market, Robinhood is expected to occupy a more important position in this rapidly developing field.

![4.jpeg](https://web-cdn.rockflow.tech/broker-cms/4_ab5da4e8c0.jpeg)

In terms of policy, after Trump officially takes office, his impact on the US stock market and the crypto industry will also become an important driving force for Robinhood's stock price to rise.

It is well known that the Trump administration has always advocated reducing financial regulation, which may further reduce compliance costs and simplify compliance processes. Financial technology companies like Robinhood that rely on flexible operations may benefit from more relaxed regulatory environments. If the crypto field continues to receive clear policy support (such as clear regulatory frameworks or relaxed restrictions), Robinhood's crypto business will continue to grow beyond expectations.

Secondly, although the new president has been in office for less than a month, the volatility he has brought to the market is significantly increasing. The market has already seen the implementation of tariff policies (and the subsequent delay) causing significant fluctuations in the US stock market. The exacerbated volatility of the stock market has a significant impact on the active level of retail trading, and Robinhood's trading volume and commission income may increase accordingly.


## Conclusion


The RockFlow research team believes that Robinhood is showing remarkable growth potential: its core user group (millennials and Generation Z) is the most active participant in crypto and will benefit from the upcoming intergenerational wealth transfer; coupled with the improvement of trading infrastructure and innovation in Gold membership services, as well as the regulatory relaxation trend of Trump's new policies and the potential benefits of encryption, these measures will jointly promote Robinhood to occupy a more important position in the global crypto market.

Although Robinhood may face regulatory pressure and market volatility in the short term, in the long run, it is expected to become an important bridge connecting traditional finance with the future of encryption, and its investment value is worth long-term attention.

Delve into the core of Robinhood's crypto business, explore the reasons surge of 383% in 2024, and analyze its current investment value.

Why did Robinhood soar by 383% in the past year?




## Highlight:
1）Bitcoin spot ETF 2024 report card: Asset Under Management totaled $115 billion and currently holds 5.7% of the Bitcoin supply. But it still accounts for only about 1% of the total Asset Under Management of all ETFs worldwide, indicating that crypto assets still have huge growth potential in the future.

2）BlackRock's Bitcoin ETF dominates, and as investors turn to low-cost options, the once important position of Canary Release has declined. Overall, Bitcoin spot ETFs have driven institutional adoption, redefined market structure, and solidified Bitcoin's position as a mainstream asset.

3）Trump promised to make the US the "Crypto Capital" and appointed Sachs as the cryptocurrency czar. With the advancement of the FIT 21 bill, the proposal of the Bitcoin Reserve Plan, and the shift in regulatory attitudes, the cryptocurrency industry will usher in a policy warm spring in 2025.


## Introduction

2024 is an exciting year in the history of encryption. The price of Bitcoin has reached a historic high, the blockchain infrastructure has been significantly improved, stablecoins have found a product-market fit, and Bitcoin and Ethereum spot ETFs have been approved. At the same time, US legislation and regulatory environments are paving a positive path for the industry. All of these are laying the groundwork for the continued outbreak in 2025.

For the US stock market, the emergence of Bitcoin spot ETFs is obviously of great significance. They have expanded the investment channels for retail and institutional investors in Bitcoin, attracted billions of dollars in net capital inflows, and elevated this asset class from a niche asset to a mainstream asset. This may be the most successful ETF in financial history, with assets under management (AUM) exceeding $110 billion in just one year.

In this article, the RockFlow research team will take you through the significant success of the Bitcoin spot ETF on the occasion of its first anniversary, review their top publishing institutions and the profound impact they have brought to Bitcoin and Financial Market, and most importantly, why we believe that in the era of Trump 2.0, the cryptocurrency market will usher in a new era.


## Bitcoin spot ETF launched a year ago, and the crypto market has undergone major changes


After a decade of anticipation, repeated application rejections, and false news that caught the crypto market off guard, the US Securities and Exchange Commission (SEC) finally approved the launch of a Bitcoin spot ETF on January 10, 2024.

Shortly thereafter, 11 ETFs entered the market one after another, competing to attract capital inflows. The publishers include asset management companies with asset management scale reaching tens of trillions of dollars - traditional financial giants such as BlackRock and Fidelity, as well as crypto-native institutions such as Bitwise.

![btc balance by ETF issuer](https://web-cdn.rockflow.tech/broker-cms/btc_balance_by_ETF_issuer_9673099733.png)

Bitcoin spot ETF has attracted a lot of funds since its launch. The acceleration of fund inflows coincides with a period of high market sentiment, which brings fresh blood to various fields of the cryptocurrency ecosystem. Although there was a downturn in the summer of 2024, Trump's victory in the US presidential election in November once again boosted optimism, so the inflow of ETFs was strengthened again.

As of now, the net inflow of Bitcoin spot ETF is about 32 billion US dollars, holding more than 1.10 million bitcoins, equivalent to a total asset size of 115 billion US dollars. These holdings currently account for about 5.7% of the circulating supply of Bitcoin.

On the other hand, Bitcoin spot ETFs account for only about 1% of the total assets under management of all ETFs worldwide, indicating that cryptoassets still have huge growth potential in the future.

Who is behind such abundant funds? In fact, the Bitcoin spot ETF mainly targets three groups - individual investors, wealth advisors, and institutional investors. The 13F document discloses the buyers behind the Bitcoin spot ETF, including both retail and professional investors, as well as hedge funds and financial institutions such as Goldman Sachs and Millennium Management. This reflects Financial Marekt's growing interest in including Bitcoin in its investment portfolio, and the Bitcoin spot ETF perfectly serves as a bridge between traditional finance and the crypto world.

The RockFlow research team expects capital inflows to continue to accelerate in 2025, and with the relaxation of regulatory conditions, we will also see broader participation from pension funds, family offices, and endowments. Optimistically, the AUM of Bitcoin spot ETFs may double.


## ETF publishers and how it affects Bitcoin itself


Once upon a time, GBTC under Canary Release was the main tool for indirect investment in Bitcoin. However, after the mass launch of Bitcoin spot ETFs, GBTC gradually faced challenges due to high management fees. Most new investors (even existing investors) turned to the newly launched Bitcoin spot ETFs because their fees were generally around 0.2% (many even had zero fees at the beginning), far lower than Canary Release's GBTC's 1.5%.

In addition, GBTC is also seeking change and has proactively spun off another lower-fee canary release, Bitcoin Mini Trust (BTC), as a low-cost alternative to GBTC.

From the perspective of publishers, BlackRock and Fidelity are clearly the biggest winners. Taking BlackRock as an example, its Bitcoin spot ETF - IBIT currently holds about 540,000 bitcoins, accounting for half of the total bitcoins held by all ETFs. At the same time, Canary Release's GBTC holdings have sharply decreased from 600,000 bitcoins to 200,000 bitcoins, becoming the biggest loser.

On the other hand, BlackRock's IBIT Asset Under Management has approached $60 billion, far exceeding the size of BlackRock's largest gold ETF - IAU ($35 billion), further consolidating Bitcoin's position as "digital gold". According to Bloomberg ETF analysts, IBIT reached the milestone of $50 billion management size in just 227 trading days, breaking the previous record of 1323 days set by iShares' core MSCI Emerging Markets ETF (IEMG).

Investors choose to support Bitcoin spot ETFs with real money due to their interest in Bitcoin. At the same time, Bitcoin spot ETFs are also affecting the price and market structure of Bitcoin itself. According to Coin Metrics' statistical analysis, as a stable source of demand for Bitcoin, the net inflow of funds into Bitcoin spot ETFs has a very significant impact on the price of Bitcoin.

The chart below shows that the large inflow or outflow of Bitcoin spot ETF funds almost always coincides with the major price fluctuations of Bitcoin.

![daily btc net flow](https://web-cdn.rockflow.tech/broker-cms/daily_btc_net_flow_45cf4be263.png)

Especially during periods of strong market momentum or significant increase in capital inflows, the correlation between the two often strengthens, indicating that as publishers buy Bitcoin to meet the needs of ETF investors, it has become a structural driving factor for the rise in Bitcoin prices. With the continuous rise in Bitcoin prices, the attractiveness of ETF products to retail and institutional investors has increased, forming a mutually reinforcing feedback loop, thereby attracting more capital inflows.

Of course, it should be noted that the trends of the two are not completely consistent, because in addition to spot ETFs, the broader macro environment, investor sentiment, and market influence of institutions such as MicroStrategy also play an important role.


## In the era of Trump 2.0, the crypto market will usher in a new situation


RockFlow's research team believes that the crypto market will rise further in 2025, mainly due to the entry of crypto-friendly president Trump into the White House. In the previous year, he had repeatedly expressed his support for the crypto economy during his campaign, including but not limited to:

Dismiss the current SEC chairperson Gary Gensler who repeatedly "troubles" the cryptocurrency industry, reduce the sentence of the founder of Silk Road, end the US's suppression and "crusade" against cryptocurrency, prevent the US from further developing CBDC, make the US the world's "cryptocurrency capital", prevent the US from selling its holdings of Bitcoin, establish a strategic Bitcoin reserve, suggest using cryptocurrency to solve the US debt problem, appoint a cryptocurrency advisory committee and promote rules "made by people who love the industry", and so on.

Trump, who has just taken office, is indeed steadily advancing his commitment to the encryption industry at that time. Therefore, in 2025, the Trump administration and the Republican-controlled Congress may bring significant changes to the encryption field - a welcome change for industry participants.

In addition, in this round of US election, the crypto industry has begun to "show off" and become one of the important top gifters of the election: according to relevant reports, Fairshake, a super political action committee (PAC) supporting cryptocurrency, raised more than $200 million from the crypto industry to help candidates who support cryptocurrency win. It mainly targets Republican and key Democratic candidates, and this move is expected to continue to bring much-needed regulatory clarity to the crypto industry.

It is worth mentioning that as early as December 2024, Trump appointed former PayPal executive Sachs as the "AI and cryptocurrency czar" of the White House. Sachs is seen as a supporter of innovation and the crypto industry. Some crypto practitioners believe that this "crypto czar" is expected to bring more benefits in supporting digital assets.

In addition, during the previous Congress, the US House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT 21), which aims to establish a regulatory framework for digital assets and allocate jurisdiction between the SEC and the Commodity Futures Trading Commission (CFTC). Although FIT 21 does not meet all the requirements of the cryptocurrency industry, it represents the largest effort made by the US Congress to date.

Also, people's interest in establishing a bitcoin strategic reserve has been reignited. Wyoming Republican Senator Cynthia Lummis recently launched the Bitcoin Act, which will establish a strategic bitcoin reserve for the US and develop a structured bitcoin purchase plan.

In addition to the above, the RockFlow research team expects that the US Federal Bank and other financial regulators will re-examine the encryption policies of the Biden era. Since 2021, regulatory agencies have put pressure on banks to "cancel" controversial encryption businesses by issuing multiple relevant explanations, basically preventing banks from engaging in custody and other activities. Given that Trump has promised to protect the encryption industry from regulatory "persecution", the revocation of these explanations means a significant shift in regulation.

Finally, the increase in Capital Markets activity in the cryptocurrency industry is also an important positive news. With the improvement of regulatory transparency, coupled with factors such as sustained investor attention, increased institutional adoption rates, and increased venture capital funds, related Capital Markets activities (including IPOs) are expected to increase significantly. As the cryptocurrency economy continues to mature, the integration of regulatory development and market enthusiasm will create more opportunities for public listings, M & A transactions, and deeper institutional participation.


## Conclusion


The RockFlow research team believes that financial products represented by Bitcoin spot ETFs are reshaping the cryptocurrency investment landscape. They not only effectively attract institutional and retail investors' capital inflows, but also drive structural demand for Bitcoin. In the past year, they have proven their potential to legalize and expand the use cases of cryptoassets.

Meanwhile, although the Ethereum ETF started slowly, its good development momentum is gradually emerging, and investors' demand for it is increasing. As the market further matures, new opportunities may further enhance the attractiveness of the cryptocurrency market to traditional financial investors. The next wave of ETF inflows may unleash even greater growth.

In 2025, with the expectation of crypto-friendly policies heating up, regulatory environments becoming clearer, institutional investors continuing to enter the market, and strategic reserve plans, the crypto market will usher in a new round of growth cycle.

why we believe that in the era of Trump 2.0, the cryptocurrency market will usher in a new era？

2025 US Stock Crypto Guide - How to Participate in This Bull Market Feast?




## Highlight:

1）Unity, founded in 2004, transformed into a game engine developer due to game development failures and gradually established its industry position. It generates revenue through two major businesses, Create Solutions and Operate Solutions, and successfully went public in 2020. Unity supports multi-platform deployment and hopes to make game development more "democratic".

2）Unity and AppLovin are in direct competition in the game advertising business. AppLovin continuously optimizes advertising placement efficiency through the AXON AI model, and its performance continues to exceed expectations; while Unity lags behind significantly due to slow data integration and lack of AI capabilities. In 2022, Unity rejected AppLovin's $20 billion acquisition offer, and the gap between the two companies has significantly widened.

3）The RockFlow research team believes that after experiencing pricing turmoil and management changes, Unity has regrouped through significant layoffs and contraction of business under the leadership of the new CEO. Coupled with advantages such as high usability and strong Cross-Platform Capability, Unity still has strong competitiveness. With the recovery of the gaming industry and developers shifting from proprietary engines to general engines, Unity's prospects are promising.


## Introduction

In the previous article, the RockFlow research team conducted an in-depth analysis of the business evolution process, latest business overview, and future stock price catalysts of AI advertising company AppLovin, which ranked first in the Nasdaq 100 Constituent Stock Index in 2024 (with an annual increase of 713%).

From being in deep trouble to later making a comeback, AppLovin's success was inseparable from the strategic transformation of acquiring multiple game studios, as well as the subsequent acquisitions and business integration of Adjust (a mobile data monitoring platform) and MoPub (an advertising trading platform that used to belong to Twitter). However, in fact, at that time, AppLovin most wanted to acquire a well-known game engine company - Unity.

In August 2022, AppLovin proposed to acquire Unity for $20 billion (a premium of up to 18%). Unfortunately, fate played a trick and Unity's shareowner rejected the proposal. Since then, Unity has made extremely bad decisions (especially trying to introduce a new pricing model), which not only successfully aroused the anger of most developers, but also led to the resignation of the initiator and former CEO John Riccitiello.

Today, two years later, the fate has reversed: AppLovin, which failed to acquire, became the annual stock king with a market value of over 100 billion US dollars, while Unity continued to decline with a market value of less than 10 billion US dollars; if it had accepted the transaction two years ago, its current value would exceed 50 billion US dollars.

In this article, the RockFlow investment research team will take you to explore the legendary game engine company Unity in depth. What is its growth history? What is the current business situation? Why did it take a completely different path from AppLovin? What is its future investment value?


## Unity's growth history, business model, and money-making rules


Unity was founded in Denmark in 2004 by David Helgason (right), Nicholas Francis (left), and Joachim Ante (center). The company failed when it released its first video game in 2005, but they saw the value of building game power builders. So it adjusted its direction and revised its vision to make game development more "democratic" by making 2D and 3D interactive content development easier for various creators (not just professional developers) to use.

![unity founders](https://web-cdn.rockflow.tech/broker-cms/unity_founders_8e702e228a.jpeg)

Its early success relied heavily on the launch of iPhone 2007, when a large number of mobile game creators emerged one after another. The mobile game ecosystem gradually flourished.
 
Similar to Apple's idea of launching the App Store, in 2010, Unity launched the Asset Store, a trading platform for developers to sell project assets on. A few years later, the company began to expand from the gaming industry to industries such as movies and TV.
 
In 2014, Unity acquired Applifier (mobile ad platform), which was later renamed Unity Ads. In the same year, the company acquired two more companies: Playnomics (later Unity Analytics) and Tsugi (later Unity Cloud Build). In October of the same year, Helgason stepped down as CEO (but remained in the company as Executive Vice President) and was taken over by former Electronic Arts CEO John Riccitiello.
 
Facebook has also used Unity game engine many times to assist in the development of its VR projects. Due to the smooth progress of its own business, good relationships with large companies, and the intermittent heat of the VR industry, Unity successfully completed multiple rounds of financing, with a valuation of $3 billion in 2016. Since 2017, Unity has begun to cooperate with Google to carry out risk investment related to AR and VR.
 
In September 2020, Unity went public with an initial market capitalization of $13.70 billion.
 
As a game engine giant, Unity allows creators to create and manipulate interactive, real-time 2D and 3D content. There are four keywords in this sentence:
 
- Creators. They are direct users of Unity and use its software to develop content. Creators include game developers, artists, architects, car designers, filmmakers, etc. Creators have different levels of professional knowledge, and people without development backgrounds can also learn to use Unity. This is consistent with Unity's original vision: to promote the democratization of game development.
- Interactive. Game plugins developed based on the Unity game engine allow end users (i.e. gamers) to connect with content and each other. In multiplayer games, one user's behavior immediately affects another user's experience.
- Real-time. The Unity game engine can adapt to user behavior and feedback in near real-time, and the image rendering speed is very fast, enough to create realistic experiences.
- 3D. The Unity game engine supports 3D graphics scenes, which enables the company to play a role in the AR and VR fields, thereby enhancing its value in multiple other industries.
 
Unity's game engine not only allows developers to visualize and iterate in real time, but also to collaborate with each other to edit content simultaneously. The presentation and display speed of these contents is very fast, and the development experience is seamless and efficient enough. More importantly, it allows creators to deploy on many platforms without additional development.
 
Unity provides many products through two complementary solutions: Create Solutions and Operate Solutions. In addition, it earns money through partnerships with multiple technology providers and sales revenue from asset stores.
 
Create Solutions enables creators to create, edit, run, and deploy real-time 2D and 3D content through a development engine. Creating once can be deployed on more than 20 platforms, including Windows, Mac, iOS, Android, PlayStation, etc. Unity provides a Modularization platform where creators can freely call up what they need, so they can achieve "personalization" according to their needs.

![unity create solutions](https://web-cdn.rockflow.tech/broker-cms/unity_create_solutions_8bb1857414.png)

How does Unity specifically profit? The company's Create Solutions is mainly based on a subscription revenue model. Previously, creators with income below $100,000 were allowed to use it for free. This means that Unity only charges large companies and is very friendly to smaller creators. The following figure outlines the core plan.

![unity create solutions fee plan](https://web-cdn.rockflow.tech/broker-cms/unity_create_solutions_fee_plan_d21b4de79b.png)

Operate Solutions belongs to another business module. After creating and deploying content, Unity will continue to help creators grow, operate, monetize, and provide other services to their end-user base.

To this end, Unity has developed various products, such as Unity Ads, Unity In-App Purchase (IAP), Delta DNA, and Vivox. Not only can games be connected to the AD Network to help creators monetize, but it can also allow creators to directly sell various items in the game, provide analysis of player behavior, and even help enable text or voice chat functions in the game. Unity has not disclosed the revenue contribution of different products, but it is estimated that Unity Ads accounts for the majority.

The operational solution enables Unity to generate revenue from the continuous management and success of content developed by creators, whether created on Unity or using third-party software. This is a long-term business that helps Unity profit from the growing gaming industry.

The above two businesses account for more than 90% of Unity's revenue, while the rest mainly comes from partners and other sources of revenue. "Partners" are actually Unity's customers, including hardware, operating system, and console game developers who pay fees to Unity so that games developed on the Unity platform are compatible with their own platforms. For example, Microsoft, Sony, and others pay Unity so that content created on the Unity engine can be immediately used on their own platforms.

Other income is mainly generated through the Asset Store. Unity charges a 30% commission for each sale of the Asset Store. This is also an important part of Unity, which simplifies the development of many inexperienced creators and helps Unity achieve its ultimate goal of democratizing game development.


## Different choices between Unity and Applovin as ad platforms


Historically, although Unity's business has developed well, its profitability has always been poor. As its business involves game advertising and marketing, it directly competes with the dominant Applovin. Unfortunately, Applovin can achieve unprecedented advertising accuracy by integrating massive data from AD Network, game users, and MAX platform, thereby driving advertising revenue to regain high-speed growth in 2023, while Unity's advertising business has basically stagnated in the past two years.

![applovin software business](https://web-cdn.rockflow.tech/broker-cms/applovin_software_business_bd1ecb41cb.png)

The core of the game ad platform is to help paying customers achieve higher ROI goals, which is largely driven by data and algorithms. The more data and algorithm matching, the higher the advertising placement efficiency and profit margin of the platform.
 
As for Unity, they do have a large amount of data and acquired IronSource at a great cost (about 74% premium) in 2022, but the business integration process was too slow. The CEO of Unity introduced the progress of competition with Applovin in Q1 2024 as follows:
 
"Frankly speaking, we have two data departments that are not fully integrated with each other. This year, we will complete the integration of the two, fully utilize more data, and use it to train our models.
 
We will launch these products on a larger scale and expect the situation to improve by the second half of 2024. We have already had some large customers of Max (Applovin's intermediary platform) switch to LevelPlay. We believe we are narrowing the gap with AppLovin.
 
No one wants to have only one partner, customers want to see competition. They still expect us to catch up. "
 
Looking at Applovin, it not only has a strong development momentum, but also continuously improves its AI advertising engine AXON. The company's CEO stated during the Q1 2024 financial report conference call:
 
"With the development of our business, there are two key points that need to be understood. Firstly, a key driver of our growth is the continuous improvement of AXON. Our model is still in the early stages and will continue to self-improve. Our team is still looking for ways to substantially improve the algorithm. Although these benefits may be unpredictable, they may bring performance far beyond expectations.
 
Secondly, our algorithm and advertising engine are not limited to games. By expanding to web-based marketing and e-commerce advertising, we expect the AXON model to further improve as demand diversity increases. "
 
By comparison, the difference is clear. Applovin understood the value of data and AI early on. Therefore, in the trend of the gaming industry turning into a recession in 2022, not only did it efficiently integrate the MoPub platform, but it also continued to focus on optimizing and training the AI model AXON. This is also an important reliance on it to continuously achieve better-than-expected performance in 2023 and 2024.
 
As for Unity, after enjoying the rapid growth of the gaming industry in 2021, it thought its prospects were unlimited. However, with the industry downturn in 2022, it has experienced many difficulties and a long journey of transformation.
 
 
## After ups and downs, Unity's long transformation has finally paid off
 
 
In 2022, with the suspension of the epidemic and the reopening of the economy, the gaming industry is no longer prosperous. With the number of layoffs in the gaming industry reaching a historic high, some analysts believe that the industry's downturn is the most severe since the Atari crash in 1983. Almost every month, there are reports of large-scale layoffs or complete closures of a large studio.
 
However, the reason why Unity's stock price plummeted more than 90% from its peak in 2021 to its lowest point in 2024 is mainly due to the company's own problems.
 
The most notorious of these was in September 2023, when under the leadership of former CEO John Riccitiello, Unity attempted to significantly increase developer fees (the new policy required charging based on the number of downloads of Unity games or applications). This move sparked public anger, and developers turned to competing development engines such as Unreal and Godot in large numbers. In the end, Unity had no choice but to withdraw the policy update, and Riccitiello was forced to leave Unity.
 
In addition, under the leadership of the former CEO, Unity conducted multiple mergers and acquisitions over a period of 9 years, acquiring companies such as Weta Digital and IronSource, most of which were later proven to be major mistakes. Taking Weta as an example, Unity paid $1.60 billion for this digital special effects company, but shut it down completely a few years later.
 
Frankly speaking, Unity at this stage is a bit like Google, investing a lot of resources in other projects far from the core business. This is feasible for Google because its search business has a very strong cash flow. But Unity simply does not have enough resources to waste.
 
Fortunately, under the new CEO in 2024, Unity has taken several necessary measures to get back on track, including a 25% layoff in 2024. This is considered necessary because Unity's workforce has expanded rapidly since its IPO, recruiting heavily for various non-core projects and absorbing a large number of personnel due to multiple mergers and acquisitions.
 
Although Unity, which has significantly reduced non-essential business, is expected to see a decrease of about 18% in full-year revenue in 2024 compared to 2023, its core business revenue unexpectedly increased and improved in the third quarter of 2024. At the same time, the company will get rid of cost burdens in 2025, and its revenue situation will become clearer.
 
Meanwhile, the entire gaming industry has experienced the turbulence of the past few years and is expected to start stabilizing. The global gaming market revenue in 2023 is about $184 billion, and analysts predict that this number will grow to about $500 billion by 2033. Therefore, Unity may once again enjoy a favorable situation in the industry.
 
The RockFlow research team believes that Unity still has the potential to become the dominant player in the gaming industry, just as Spotify and Netflix have captured most of the market share in music and video streaming media.
 
In addition, considering that there are currently only two main independent game engines, Unity and Unreal. Although Unreal is most suitable for high-end games, its drawback is that it is not easy for developers to use and does not run well on low-end game consoles and PCs. Rivals such as Godot engine are good for smaller game projects, but difficult to meet the needs of high-cost games. Overall, Unity has achieved a good balance between producing a good enough graphical interface and making it easy for novice developers to master.
 
Moreover, reviewing the previous fee policy controversy, Unity still has a strong competitive advantage. At that time, developers generally resisted or gave up Unity, choosing Godot or other solutions, but ultimately returned to Unity due to ease of use, asset store, and platform interoperability. Although Unity's measures were very unwise, this negative event still highlights the potential value and irreplaceability of Unity game development engine.
 
RockFlow's research team believes that Unity and its main competitor Unreal will gain a larger market share in the future. Due to the decline of the gaming industry in the past, many large game studios have integrated their businesses and reduced their staff, and practitioners' interest in continuing to develop proprietary game engines has decreased. Developers are increasingly aware that employers may fire them at any time, so they are less willing to work in proprietary engines. This is undoubtedly good news for Unity, which supports development on all major platforms.
 
In summary, in the future, a portion of game development will still shift from proprietary engines to Unity or Unreal, which will enable Unity to occupy a larger share in the continuously expanding market.
 
 
## Conclusion
 
 
According to the latest financial report, Unity's Q3 2024 performance exceeded expectations and has raised its future performance guidance. The RockFlow research team believes that Unity's worst period may have passed.
 
On the battlefield of game development engines, Unity has played a legendary role. It went public in 2020 and was once regarded as a pioneer of game development democratization. However, the cogs of fate are always unexpected: in 2022, Unity, which rejected AppLovin's $20 billion acquisition offer, now has a market value of only $9.20 billion, while its pursuer AppLovin has risen to a technology giant with a market value of hundreds of billions of dollars.
 
In this essentially data integration and AI application competition, Unity is indeed lagging behind. However, despite the subsequent pricing turmoil and management turmoil, with its profound technical accumulation and industry status, Unity's story is far from over in the fertile land of game development engines.

Explore the legendary game engine company Unity in depth. Why did it take a completely different path from AppLovin? What is its future investment value?

How can game engine giant Unity redeem itself after missing AI and $20 billion acquisition offers?





## Highlight:

1）From 2018 to 2021, AppLovin completed a key transformation. It is no longer satisfied with just being a simple ad platform, but has established a "ad platform + game publishing" dual-wheel drive model by acquiring multiple game studios. This has allowed the company to obtain valuable First-Party data, laying the foundation for future development.

2）The launch of AXON 2.0 is an important milestone in the development history of AppLovin. This AI-driven advertising engine has achieved unprecedented precision in advertising delivery by integrating massive data from AD Network, game users, and MAX platform. It not only improves advertising efficiency, but also creates a difficult-to-replicate technological barrier for AppLovin.

3）RockFlow's investment research team is optimistic about AppLovin's breakthrough in market boundaries. It is not limited to the billion-dollar game advertising market, but focuses on the entire digital advertising field, expanding the target market to billions of dollars. This opens up broader growth space for AppLovin and allows investors to see development potential far beyond expectations.



## Introduction

There is a company that went public in 2021. Its stock price performed well in the first half of the year, but it continued to suffer heavy losses for more than a year, with a drop of more than 90%. Later, it turned the tables, with the stock price soaring more than 3300% from its lowest point in two years. In just 2024, it rose more than 7 times, and its market value easily exceeded 100 billion.

This company is AppLovin, specializing in advertising and marketing, and is currently a highly sought-after AI star stock. How did it play PlayerUnknown's Battlegrounds in adversity? And how did it quickly grow into an important player in the advertising and marketing market beyond the two giants of Google and Meta? What inspiration does its business evolution have for current internet companies? What surprises will AppLovin bring with the help of AI?

In this article, the RockFlow investment research team will conduct an in-depth analysis of AppLovin's business evolution process, latest business overview, and future possibilities, giving you a glimpse into the value of this emerging advertising giant.



## How does AppLovin create a "ad platform + application" dual-wheel drive model?



Advertising is an ideal industry with a high ceiling and high profits. The reason why AppLovin has developed so rapidly is that it has long since moved away from its early positioning as a mobile game ad platform and become a pivotal digital advertising giant. Through business expansion and partial acquisitions, it has established a comprehensive enough technology platform to support a highly expansive business, and has exceeded market expectations multiple times with its strong execution capabilities and data performance.

In short, AppLovin's business is divided into two parts: software platform and application. In other words, it not only controls a huge advertising monetization platform, but also has hundreds of popular applications (monetized through its own platform), which can be regarded as the most ideal model for internet companies.

AppLovin's software platform mainly serves game companies that want to acquire customers and monetize advertising inventory (but is also entering the e-commerce advertising market), and its revenue comes from three key products: AppDiscovery, MAX, and Adjust.

The cornerstone of the AppLovin ad platform is AppDiscovery, which is the third largest mobile game In App Advertising network after Google and Meta. The product provides advertisers with performance-based advertising tools to optimize spending based on specific performance goals. AppDiscovery accounts for about 65% -70% of its software platform revenue.

For  AppLovin, the top priority of its core AppDiscovery product is the AI advertising engine AXON (which will be discussed in detail later). AXON is powered by data collected by advertisers and publishers who conduct transactions on the network, as well as proprietary data generated by AppLovin's other Line of Business, which greatly facilitates matching between advertisers and publishers. Advertisers and publishers often work with multiple AD Networks at the same time to maximize profits.

![applovin AppDiscovery](https://web-cdn.rockflow.tech/broker-cms/1_b9f5c3e034.PNG)

The second focus of AppLovin's platform business is MAX, which contributes about 20% -25% of platform revenue. It is an intermediary platform that helps publishers conduct real-time competitive auctions of their advertising inventory to maximize revenue. It is provided free of charge to publishers and generates revenue by charging a 5% fee to third-party advertisers who bid through MAX.

From a business perspective, once the intermediary platform is embedded, it will be troublesome to switch. The analysis provided by the intermediary platform will also be integrated into the business process, resulting in greater transfer costs. Therefore, although the revenue brought by MAX is not as much as AppDiscovery, it has become very important because it collects pricing data from competing AD Networks and publishers. It has a market share of over 60% in the segmented field, providing AXON with a large amount of trainable data.

Adjust is the third product of AppLovin platform business, accounting for about 10% of platform revenue. As a SaaS solution, it helps mobile advertisers attribute user downloads/customer engagement to specific marketing channels/activities. It only accounts for a small part of the total business, but similar to MAX, it provides a large amount of application data for improving AXON.

Apart from the platform business that contributes about 70% of the total revenue, AppLovin also has its own application revenue. As mentioned earlier, it not only controls a huge mobile advertising monetization platform, but also holds hundreds of popular mobile games (developed by 11 internal studios). These games monetize through AppLovin's ad platform and in return, provide exclusive First-Party data to AppLovin.

AppLovin's games mainly focus on casual, match-three, and card games because it believes these games have lower development risks and more predictable returns. In 2023, about 70% of app revenue will come from in-app purchases (IAP), and the remaining 30% will come from In App Advertising (IAA).


## Always seeking to change, AppLovin's business evolution process



Essentially, AppLovin has always been an advertising company. It decided to enter the game publishing business in 2018 because advertisers and publishers were unwilling to share user data with AppLovin, which was smaller at the time.

And it keenly realized the need for First-Party data to compete with Google and Facebook, so it began to acquire game studios on a large scale. Not only did it monetize newly published games to support the company, but it also used First-Party data to train its ad platform algorithm to optimize placement efficiency and ROI.

Considering the conflict of interest with platform customers, AppLovin's early strategy was not widely welcomed, but the company was not discouraged. By the time of the IPO, the revenue generated by gaming applications accounted for more than 80% of the total revenue. This is one of the key factors identified by management as the "strategic flywheel" behind AppLovin's success.

At the same time, AppLovin's platform revenue has also begun to soar, gradually increasing from 5% in 2019-2020 to over 15% in 2020-2021. Its growth is almost entirely due to the launch of the AI advertising engine AXON, as well as Apple's IDFA changes causing setbacks to Facebook's ad platform and a large number of advertisers reallocating advertising spending to other quickly adapting platforms.

Due to the above factors combined with the optimistic sentiment of the US stock market at that time, AppLovin performed well in its first year of listing. As of the end of 2021, the stock price has risen by nearly 100% since its IPO, and its valuation level is far superior to most peers.

However, in the following year of 2022, AppLovin faced an unfavorable situation. The company failed to meet market expectations and its performance data repeatedly disappointed people. Fortunately, this is not all. Although it experienced a painful period, it executed many strategic measures, laying the foundation for a comeback in 2023.

AppLovin's first major task in 2022 is to integrate MoPub. The company acquired MoPub from Twitter at the end of 2021, another advertising intermediary platform and the second largest player in the segment. AppLovin decided to close MoPub and migrate customers to its own MAX. Although the process was very tricky, in order to avoid customer loss, AppLovin gave up short-term benefits, paid a $210 million reward, and temporarily halved the 5% intermediary fee. This damaged the short-term financial situation, but the Retention Rate of MoPub's top-tier clients reached 90%.

The integration of MAX and MoPub is of great significance to AppLovin, not only because a new giant has emerged - MAX has become the natural choice for advertisers and publishers to integrate, but also because it provides one of the best data sources in the industry after Apple's IDFA policy.

It is also because of this data source that AppLovin's core growth engine today, the AI learning model AXON, can more accurately identify new advertising pairs, utilize incorrect pricing, and calibrate its pricing behavior to maintain competitiveness. This played a key role in AXON's algorithm upgrade in 2022.

The second important business of AppLovin in 2022 is to decouple the rapidly growing and high-profit platform from its slowing application business. With Apple's IDFA change being widely promoted at the end of 2021, game publishers who rely more on identifier positioning are beginning to feel pressure. In response, AppLovin announced in early 2022 that it is preparing to operate the application business as an independent department and explore the possibility of selling or divesting some businesses.

This is a big reversal of the AppLovin "strategic flywheel" story mentioned earlier, but it was necessary for AppLovin at that time. Because the policy change of IDFA reduced the efficiency of cross-application tracking and weakened the importance of the department. In addition, the attitudes of advertisers and publishers were also changing at this time. They realized the benefits of sharing more data with AXON and decided to reduce their dependence on application business. By the end of 2022, AppLovin reduced the number of game studios from 20 to 11, further focusing on platform business.

Unfortunately, in 2022, with the impact of the COVID-19 pandemic and the reduction of advertising spending by top players in the market, AppLovin's growth momentum began to slow down, and its revenue remained flat for three consecutive quarters. Fortunately, although the business appears to be stagnant on paper, the AppLovin R & D team is working hard to develop the next version of the Machine Learning algorithm - AXON 2.0, which will eventually bring about a huge change. This ultimately played a huge role in AppLovin's recovery in 2023.

2023 is a year of return for AppLovin. It launched AXON 2.0 in Quarter 1, with advertising optimization efficiency far higher than the first version, and promoted AppDiscovery to achieve double-digit growth for four consecutive quarters. As of the fourth quarter of that year, its platform revenue growth rate was as high as 88% year-on-year. At the same time, the application business also reversed the downward trend and showed net revenue growth in the second half of 2023.

![applovin revenue](https://web-cdn.rockflow.tech/broker-cms/4_2a46478f03.png)

Due to its strong performance, AppLovin's stock price has surged nearly 300% in 2023. The RockFlow investment research team believes that this is closely related to its multiple strategic initiatives in the past few years.
The acquisition and integration of MoPub ensures its complete foothold in the mobile advertising ecosystem.
The continuous development of software solutions that are highly coordinated with a wider range of businesses has also been recognized by the market.
The separation of software platforms and application departments has resolved long-standing conflicts of interest.
Finally, R & D reinvestment led to the launch of AXON 2.0, helping AppLovin achieve performance growth far exceeding its competitors in a relatively stable market in 2023.


## With a rise, 700% increase creates a new legend in 2024


For a long time, AppLovin has enjoyed the benefits of industry tailwinds, with the mobile advertising industry consistently growing at a double-digit compound annual growth rate. Coupled with a steady approach and Line of Business expansion across multiple products, the company is able to share more of the non-game advertiser revenue flowing into the mobile gaming ecosystem.

Not to mention, the AI engine behind its ad platform - AXON 2.0 - continues to benefit from the training of an expanding database, and the growth driven by such algorithm efficiency improvements is non-linear. As the CEO of AppLovin said before (when the actual progress was not smooth):

We cannot predict the progress of technology. But when it happens, it will be a leap in growth. Based on our operating scale, algorithm improvements can bring huge cash flow growth capabilities over time.

By 2024, as the management has planned to launch a full-process intelligent solution and self-service platform in the coming quarters, the RockFlow research team believes that we can expect to see its growth prospects remain strong. At the same time, AppLovin is increasingly benefiting from new stories - the continuous optimization of advertising business by AI engine AXON 2.0 and the continuous progress of e-commerce advertising exceeding expectations.

According to relevant data, global digital advertising spending will increase from $136.07 billion in 2024 to $175.66 billion in 2028, with a compound annual growth rate of + 6.5%; in contrast, the game advertising market where it was previously located is too small, and it is expected to increase from $8.20 billion in 2023 to $13.70 billion in 2028.

The market space has expanded by about 16 times, so it is not surprising that the market is pursuing AppLovin. AppLovin can still seize huge opportunities, and e-commerce will become an important part of its boundary expansion.

AppLovin's stock price rose by 718% in 2024, far outperforming the market and advertising peers. This is largely due to its early good performance in entering the e-commerce advertising market. "Early data exceeded our expectations, and advertising clients in the pilot program received considerable returns. In many cases, our traffic increment was close to 100%."

On the other hand, the data for the third quarter of fiscal year 2024 shows that the revenue 1.19 billion USD (a year-on-year increase of 38.3%), the adjusted EBITDA profit margin reached 60.1% (a year-on-year increase of 11.7%), and the earnings per share reached 1.25 USD (a year-on-year increase of 316.6%). These numbers have exceeded expectations multiple times, and the year-on-year growth rate has once again increased, which adds confidence to investors who believe in the AI narrative.

![applovin platform revenue](https://web-cdn.rockflow.tech/broker-cms/5_8717f7ce4f.png)
![applovin apps revenue](https://web-cdn.rockflow.tech/broker-cms/6_9414fb835c.png)

## Conclusion


How can an ad tech company achieve a stock price growth of 3300% in 24 months? The RockFlow research team believes that AppLovin's story tells us that true business evolution often begins in despair.

Starting from an ordinary ad platform, AppLovin built a data closed loop by acquiring game studios, creating a unique "advertising + gaming" dual-engine business model. The launch of AXON 2.0 marks a breakthrough in AI in the field of advertising, transforming data value into actual business advantages. From game advertising to the global digital advertising market, it is expanding its target market size from $8.20 billion to over $170 billion.

In the red ocean of digital advertising monopolized by giants, AppLovin has achieved a business miracle through technological innovation and strategic evolution. Its success tells us that maintaining the ability to innovate and evolve on the right track will eventually lead to exponential growth opportunities.



An in-depth analysis of AppLovin's business evolution process, latest business overview, and future possibilities.

2025 Blog Insights