GE employs a razor-and-blades model on an industrial scale, accepting losses on initial engine sales to powerful airframers like Boeing. This secures a multi-decade, high-margin stream of mandated service and parts revenue from a fragmented base of airline customers, where aftermarket sales can be 3-5 times the original engine price.

AI companies with the foresight to sign long-term, multi-year compute contracts gain a significant margin advantage. They lock in prices based on past valuations, while competitors are forced to buy capacity at much higher current market rates driven up by the increasing value of new AI models.

Despite its near-monopoly on leading-edge chips, TSMC maintains its dominance partly by not charging exorbitant prices. This conservative, long-term strategy makes it economically unattractive for new competitors to enter the market, thus protecting TSMC's position more effectively than maximizing short-term profit would.

The market still views Baker Hughes through its legacy oilfield services lens. However, its Industrial Energy Technology (IET) division, which supports long-term energy infrastructure build-outs, is becoming the dominant, higher-quality driver of the business, creating a valuation disconnect.

Instead of pushing for quick, high-margin sales or meeting vendor quotas, Worldwide Technology focused on multi-year relationships and solving core business problems. This customer-first, long-game approach was foundational to their growth from a few hundred million to a multi-billion dollar giant.

The Industrial Energy Technology division's model isn't just one-time equipment sales. Each installation seeds a long-term (10+ year) service contract with margins nearly double the initial equipment sale, creating a compounding, high-margin recurring revenue stream that is being underappreciated.

“Partner Lifetime Value” reframes partnerships as long-term assets, not transactional wins. Companies committing to consistent, long-run partnerships achieve superior growth and profitability, creating a force multiplier effect far beyond standard customer lifetime value.

Unlike past oil-driven booms, Baker Hughes' current growth is fueled by a convergence of secular trends: AI data centers, utility grid upgrades, coal plant retirements, and industrial onshoring. This diversified demand base suggests a more sustainable, less cyclical growth trajectory.

The bull case for Baker Hughes is not about convincing the market to pay a higher valuation multiple. Instead, it's a fundamental story based on the predictable growth of its IET backlog, margin expansion from services, and value creation from acquisitions, all of which will drive significant earnings growth.