A surprisingly robust economy and a profitable AI boom are propelling the key US tech giants to a milestone that seemed inconceivable just just a few a long time ago. Nvidia, Microsoft and Apple have all surpassed the $3 trillion mark in market capitalization, with Google and Amazon following closely behind within the $2 trillion range.
Together, these five technology giants alone at the moment are price greater than $14.5 trillion and account for about 32% of the S&P 500. For comparison, in 2002, when the dot-com bubble burst, the whole market capitalization of all U.S. stocks was $11.1 trillion, in response to Siblis Research. DataThe performance of major technology firms has been particularly impressive this yr. Nvidia, for instance, increased its market capitalization from $2 trillion to $3 trillion in lower than 100 days.
This raises the query: Which tech giant will reach the following big milestone, $4 trillion market cap, first? Some bears argue that the record performance of huge tech firms cannot last without end given their high valuations and the slowing economy, while bulls imagine that is only the start of a series of AI-driven successes for giant tech firms.
“I think in a year we will [will] have three companies with a market capitalization of $4 trillion: Nvidia, Apple, Microsoft,” said Wedbush tech analyst Dan Ives Assets.
He argued that a lot of his peers on Wall Street proceed to underestimate the AI revolution and the health of the U.S. economy. “If you don’t have a telescope, you can’t find a recession. And the Fed? Their next move is a cut, not a hike. So to me, all signs are bullish,” he said. “It’s 9 p.m., and the party goes until 4 a.m. … the haters are going to keep hating and keep saying this is a bubble.”
NVIDIA
Of course, opinions vary widely as to where the large tech firms are headed. However, many experts are convinced that chip giant Nvidia might be the primary company to achieve the $4 trillion mark in market capitalization, driven by the seemingly insatiable demand for its AI-enabled hardware.
“The first person to get there may be probably the godfather of AI Jensen [Huang] and Nvidia because they’re the one ones on the market – their GPUs are the brand new oil or gold within the technology world and there is no real competition,” Ives said.
Nvidia shares have risen about 160% year-to-date and greater than 3,000% over the past five years, prompting some analysts to warn that the tech giant’s valuation is stretched and doesn’t take into consideration increasing competition within the semiconductor market.
As David Trainer, founder and CEO of research firm New Constructs, said AssetsShawn Tully wrote last month: “Nvidia’s valuation is ridiculous. The company faces the same curse as Tesla. But when Tesla became profitable, many competitors entered the electric car market, lowering margins and slowing sales. The same thing will happen to Nvidia.”
However, Ives noted that despite the sharp rise in Nvidia shares, revenue and profits have also increased. In the quarter that resulted in April, Nvidia posted record revenue of $26 billion and net income of $14.8 billion. In the identical quarter in 2021, the corporate posted revenue of just $5.8 billion and net income of $1.9 billion.
Louis Navellier, founder and chairman of family office Navellier & Associates, also dismissed the competition argument, claiming Nvidia essentially has a “monopoly” on key AI chips, which is able to result in regular revenue and profit growth in the approaching years. “And you know, Jensen is kind of the new Elon, he has a kind of cult status,” he said, adding that this may proceed to drive retail investors into the stock.
Nvidia market capitalization as of July 5: $3.14 trillion
Microsoft
Microsoft’s thriving cloud business and major investments in ChatGPT developer OpenAI have supported the corporate’s stock price in recent times. But it’s the corporate’s diverse and sustainable revenue streams that can give it a $4 trillion market capitalization, says Tim Pagliara, founder and chief investment officer of independent wealth management firm CapWealth.
He said that Nvidia will be the first to achieve the $4 trillion mark as a result of what he called the present AI “mania,” but Microsoft might be the “more sustainable” $4 trillion company.
“They’re betting on AI, but they also have a tremendous amount of things in the pipeline. And I know as a small business owner, we’re happy to continue paying them more per user per month for everything from Azure to some of the additional add-ons they’ve developed for security and things like that,” he added, referring to Microsoft’s Azure cloud computing business.
Pagliara believes Microsoft’s big tech rivals even have riskier business models. Apple relies on consumers buying latest iPhone offerings every few years, and Nvidia advantages from an absence of competition within the short term, he said. Meanwhile, Microsoft has several opportunities for regular revenue growth, from its Azure cloud business and Office 365 to Windows and Linkedin.
Market capitalization: $3.48 trillion
Apple
As for the longer-term outlook, Apple is at the highest of many analysts’ lists due to the company’s ability to make use of AI to entice customers to upgrade their current phones and attract more iPhone customers. The company is probably not the primary to hit a $4 trillion market cap, but it can be there soon, these bulls say.
“I think in the next two or three years Apple will have the largest market capitalization because they have 2.2 billion iOS devices,” Ives predicted. “Consumer AI will be a breakthrough for Cupertino – the company is just at the beginning of an AI-driven supercycle.”
Louis Navellier also expressed optimism about Apple’s future, but said that some “small breakthroughs” could be needed to encourage more customers to purchase latest iPhones.
He cited latest AI tools and the potential for foldable iPhones as examples. “I don’t know if they’ll announce that in September, but if they do, it’ll be a $2,500 phone that will sell like crazy and drive the stock up.”
Market capitalization: $3.46 trillion
What about Alphabet and Amazon?
The market capitalization of Google’s parent company currently stands at $2.36 trillion, well below the $4 trillion mark. Analysts said Alphabet will have the option to capitalize on the AI revolution, but its missteps in hallucinations have left it behind, and its cloud business is not doing in addition to others. The search giant, nevertheless, is taking talent from its competitors to catch up, as recently Reports have shown.
It’s the same story with Amazon, which just crossed the $2 trillion mark and whose stock price experts expect will take a while to just about double. Wedbush’s Ives argues that Amazon’s cloud business, AWS, has also lost out to Microsoft. “I think there was some hubris in underestimating what Nadella and Microsoft are doing, and with rivals across town and the 2-0-6 area code, that was quite a blow to Amazon,” he said.
And Amazon can be lagging behind when it comes to AI, in response to the experienced tech analyst. However, Ives noted that CEO Andy Jassy has made changes to the corporate’s cloud business and that Amazon, with its huge customer base, should profit more from AI in the longer term.
Of course, every tech giant on this list faces risks as well. Antitrust regulations, cyberattacks, a slowing economy, and a discount in AI spending all must be considered. But for now, the bulls remain optimistic—and so they think you have to be, too.
“The tech bears with their spreadsheets and valuations will remain in hibernation,” Ives said. “But when everyone meets for breakfast at 6 a.m. after that AI party. The bulls [will have] won and the bears just sound smart.”
