Advancements in technology over the past several years have had a distinct impact on the value of some of the tech's most recognizable companies. As the adoption of artificial intelligence (AI) continues to ramp up, so too do the market caps of the main beneficiaries of the technology. A look at the list of the world's most valuable companies is revealing, as the top five -- and eight of the top 10 -- are inexorably linked to generative AI.
There are currently just seven companies with market caps that place them in the $1 trillion club and just three worth more than $3 trillion. The debate is raging about which company will be the first to achieve a $4 trillion valuation. However, Wedbush analyst Dan Ives believes investors may be missing the forest for the trees, suggesting there are actually three companies that will be charter members of the $4 trillion club within 12 months.
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Let's look at the three most likely contenders and what will take them across the finish line.
Image source: Getty Images.
1. Nvidia
For those watching the developments in technology over the past couple of years, it will come as no surprise that Nvidia(NASDAQ: NVDA) heads the list. The company is currently the world's most valuable company (as of this writing), with a market cap of $3.38 trillion. As a result, it will only take stock price gains of about 18% for Nvidia's value to surpass $4 trillion.
The chipmaker's graphics processing units (GPUs) provide the computational horsepower necessary to advance AI and quickly became the gold standard for running generative AI models in data centers and in the cloud. By some estimates, Nvidia controlled as much as 98% of the market last year and that likely won't be changing anytime soon.
Investors have rightly wondered whether the unprecedented demand would continue, but the available evidence is compelling. Microsoft (NASDAQ: MSFT), Meta Platforms, Amazon, and Alphabet rank among Nvidia's biggest customers. Each of these tech titans reported their results last week, and each announced plans to ramp up their capital expenditures to keep up with the demand for AI. Furthermore, the vast majority of that will be on the chips and servers needed to facilitate AI, suggesting Nvidia will benefit from a good deal of that spending.
"The first one to get there is likely to be ... Nvidia because they're the only game in town," Ives said, "Their GPUs are the new oil or gold in the tech world with no real competition."
I think Ives hit the nail on the head. As the undisputed leader in the GPU space and dominant force in the market, Nvidia is in the pole position and stands to be the biggest beneficiary of the ongoing adoption of generative AI. Furthermore, the company's margins have expanded with its market share, making Nvidia much more profitable.
2. Apple
Apple(NASDAQ: AAPL) recently ceded to top spot to Nvidia, but with a market cap of roughly $3.35 trillion, it's still nipping at the chipmaker's heels. The iPhone maker needs stock price gains of just 20% to clear the $4 trillion threshold and there are plenty of catalysts that could take it there.
For its fiscal 2024 fourth quarter (ended Sep. 28), Apple's sales grew 6% year over year, resulting in a September quarter record, while adjusted earnings per share (EPS) jumped 12%. The company noted that its active installed base of devices hit a new all-time high. The biggest driver was the debut of the iPhone 16 with Apple Intelligence, the company's on-device AI. It's important to note that with just nine days of new iPhone sales in the results, there's likely much more to come.
Ives believes that thanks to the tough economic conditions of the past few years, consumers have been reluctant to splurge for a new smartphone. There are an estimated 300 million iPhones that haven't been upgraded over the past four years, which represents a fertile field for Apple to plow. Ives suggests that Apple could sell as many as 240 million iPhones in its fiscal 2024, kicking off a new supercycle.
I think the analysts' logic is incontestable. The improving macroeconomic environment and Apple's loyal customer base could be the catalysts for a run on the new AI-powered iPhone, which could cement the company's upcoming membership in the $4 trillion club.
3. Microsoft
Microsoft is currently the world's third most valuable company, with a market cap of $3 trillion. As such, the stock is just 32% below the $4 trillion benchmark. The company was quick off the mark to unveil Copilot, its suite of AI-powered productivity tools, followed quickly by Copilot-powered PCs. These are in addition to the AI models offered to its cloud customers. These moves have helped position Microsoft to profit from the growing adoption of AI.
During its fiscal 2025 first quarter (ended Sep. 30), Microsoft's Azure Cloud grew 33% year over year, and management noted that 12 percentage points of its growth was driven by demand for AI services, up from 8% in Q4. This helps illustrate the ongoing success of Microsoft's broad AI strategy.
Ives notes that Microsoft's AI revenue is on track to exceed a $10 billion run rate in Q2, with further acceleration happening in the second half of fiscal 2025. He also estimates that 70% of Microsoft's customer base will be using its AI solutions within three years, which could drive the stock higher.
I think Ives is right on the money. Microsoft's technology extends into both the enterprise and consumer markets and its AI-powered offerings reach beyond that of its cloud rivals -- which should fuel additional growth for years to come.
A word on valuation
The generative AI market is expected to be worth $1.3 trillion by 2032, according to Bloomberg Intelligence, with a compound annual growth rate (CAGR) of 42% over the coming decade.
Despite the magnitude of the opportunity they are pursuing, Apple, Nvidia, and Microsoft are still attractively priced at 32 times, 30 times, and 28 times forward earnings. Taken in the context of this large and growing market, the opportunity is clear.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
