Will Microsoft, Apple, or Nvidia Be the First to Join the $4 Trillion Club?

The $4 trillion club is still looking for its first member. While it’s uncertain which company will reach this milestone first, three contenders stand out:

• Apple: Currently valued at $3.5 trillion.
• Nvidia: Currently valued at $3.1 trillion.
• Microsoft (NASDAQ: MSFT): Currently valued at $3.08 trillion.

Apple is closest to the target. However, Nvidia’s rapid growth in the artificial intelligence (AI) hardware sector may enable it to hit the $4 trillion mark first.

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This article will focus on Microsoft. The company’s integration of AI into its established products has begun to deliver impressive results. During its fiscal 2025 second quarter, which ended December 31, the company’s AI cloud revenue soared by 157%.

Microsoft’s path to the $4 trillion milestone is uncertain, but I believe it has strong potential to not only reach it eventually but also stay there long term.

Image source: Getty Images.

The High Demand for Microsoft’s Copilot AI Assistant

Since 2019, Microsoft has invested around $14 billion in OpenAI, the creator of ChatGPT. They utilized some of OpenAI’s latest models to develop Copilot, its AI assistant. Copilot is integrated into popular Microsoft products like Windows, Edge, and Bing, allowing users to answer complex questions and generate images at no cost.

For those who pay for Microsoft 365 products, such as Word, Excel, and PowerPoint, Copilot is also available as a paid add-on. Over 400 million licenses for Microsoft 365 are in use globally, indicating a vast market for adding Copilot.

Demand for Copilot is rapidly increasing, as highlighted by Microsoft’s Q2 results. Customers who adopted Copilot during its first quarter have expanded their usage tenfold. Additionally, employee utilization of Copilot surged by 60% in Q2 compared to the first quarter of fiscal 2025.

Moreover, 160,000 organizations used Microsoft’s Copilot Studio, allowing them to create custom AI agents. These agents can be integrated into nearly any software used by employees, enabling functions like summarizing meetings and onboarding new team members. In Q2 alone, companies created over 400,000 custom agents—double the number from Q1.

Azure AI Revenue Surges in Q2

Copilot is a vital part of Microsoft’s AI efforts, but it is not the only component. The Azure cloud platform has emerged as a preferred choice for businesses looking for top-tier data centers and ready-to-use large language models from developers like OpenAI.

AI revenue drove significant growth for Azure, which increased by 157% in Q2 compared to the previous year. This growth contributed 13 percentage points to Azure’s overall revenue rise of 31%:

With rising demand for data center capacity exceeding supply, Microsoft is heavily investing in new infrastructure. The company has allocated $42.6 billion in capital expenditures (capex) during the first half of fiscal 2025, mainly towards data centers and chips from suppliers such as Nvidia. This followed $55.7 billion in capex during fiscal 2024.

Investors can gauge the effectiveness of Microsoft’s spending through Azure AI’s revenue growth. Continuing increases in this area validate the company’s substantial investments.

Nvidia’s CEO Jensen Huang has claimed that cloud operators could generate $5 for every $1 spent on AI hardware over four years. If true, Microsoft’s capex could produce hundreds of billions in additional revenue.

Microsoft’s Journey to the $4 Trillion Club

The current price-to-earnings (P/E) ratio for Microsoft is 33.2, quite similar to the Nasdaq-100 index’s P/E ratio of 33.3. This suggests that Microsoft is fairly valued compared to its tech peers.

If Microsoft’s P/E ratio remains steady, the company needs to achieve a 33% growth in earnings per share (EPS) to justify a $4 trillion valuation. Historically, Microsoft has averaged a 20.6% annual EPS growth over the last decade, so reaching this goal in under two years is plausible.

That said, the company is currently experiencing slower growth due to significant AI capex spending impacting its earnings. Wall Street forecasts an 11.5% EPS increase for fiscal 2025 and a 14.5% increase for fiscal 2026. If the 14.5% growth continues, Microsoft could touch the $4 trillion valuation by fiscal 2027.

However, Microsoft’s P/E ratio is lower than both Apple and Nvidia, which have surpassed the $3 trillion mark. If Microsoft’s P/E ratio improves, it could reach the $4 trillion threshold sooner, typically linked to accelerated growth that AI might facilitate.

PE Ratio data by YCharts

Microsoft states that its AI revenue across all sectors is now at an annual run rate of $13 billion, a staggering increase of 175% year over year. While this remains a small part of the total revenue of $245 billion for fiscal 2024, substantial growth in AI revenue could soon become a significant factor driving both top and bottom lines.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, 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.

The views and opinions expressed herein are those of the author and do not reflect those of Nasdaq, Inc.