Glossary term
TAM (Total Addressable Market)
The total revenue opportunity a product would capture if it owned 100% of its market. SAM (Serviceable) and SOM (Obtainable) are progressively more realistic subsets. TAM is the ceiling — and when the TAM math stops expanding, the stock's growth multiple compresses. HALO 100 uses TAM expansion as one of four compounder-quality dimensions.
Definition & Context
TAM is the theoretical ceiling on revenue. It is usually estimated top-down (industry spend × addressable share) or bottom-up (target customers × expected price × adoption). SAM (Serviceable Addressable Market) trims TAM for geographic, regulatory and distribution constraints. SOM (Serviceable Obtainable Market) trims SAM further to what a company can realistically capture given competition. The three numbers typically shrink by an order of magnitude each.
TAM is the most frequently abused metric in tech storytelling. Pitch decks routinely quote TAMs in the hundreds of billions that bear no relationship to where the product actually sells. The useful question is not how big is the TAM but is the TAM expanding faster than the company’s penetration? When TAM grows 20% and penetration grows 10%, multiples expand; when TAM tops and penetration grows 10%, multiples compress even as revenue grows.
Why It Matters for Investors
HALO 100 screens compounders on rolling five-year TAM expansion as one of four quality dimensions, because compounders that run out of TAM runway de-rate sharply even before growth slows. The Closelook Capex Cliff framework tracks the inverse: when Rubin 100 capex turns flat for four consecutive quarters, the implied TAM of the data-centre build-out is peaking, and downstream names de-rate ahead of fundamentals.
Related Concepts
TAM is a driver of Moat durability, interacts with the Capex Cliff framework, and is a major input to PEG Ratio-based quality screens.