Which Tech Giants Will Hit a $4 Trillion Valuation First?

Recent technology advancements have significantly influenced the market values of leading tech firms. The rise of artificial intelligence (AI) is particularly driving growth among companies heavily involved in generative AI. Notably, the five most valuable companies globally, and eight out of the top ten, are closely associated with AI technology.

Only seven companies currently hold market capitalizations of over $1 trillion, and just three exceed $3 trillion. Among investors, a lively debate is ongoing regarding which company will achieve a $4 trillion valuation first. However, Wedbush analyst Dan Ives posits that three firms are actually set to join the $4 trillion club within the next year.

Let’s delve into the three likely candidates and the factors that could propel them forward.

Image source: Getty Images.

1. Nvidia

No surprises here: Nvidia (NASDAQ: NVDA) is at the forefront, holding the title of the world’s most valuable company with a market cap of $3.38 trillion. To surpass the $4 trillion mark, its stock would need to climb approximately 18%.

The company’s graphics processing units (GPUs) are vital for AI advancements, establishing Nvidia as the leading provider for generative AI applications in both data centers and the cloud. Last year, Nvidia was estimated to control as much as 98% of the GPU market, a dominance that shows no sign of diminishing.

Concerns about enduring demand are valid, yet the current signs are optimistic. Major clients like Microsoft (NASDAQ: MSFT), Meta Platforms, Amazon, and Alphabet have plans to increase their spending on AI technologies, which bodes well for Nvidia’s future sales.

According to Ives, “The first one to get there is likely to be … Nvidia because they’re the only game in town. Their GPUs are the new oil or gold in the tech world with no real competition.”

This assessment appears accurate; Nvidia stands out as the market leader and is likely to benefit immensely from the burgeoning adoption of generative AI. Additionally, its increasing market share has improved margins, making the company increasingly profitable.

2. Apple

Although it recently lost its top position to Nvidia, Apple (NASDAQ: AAPL) remains a close competitor with a market cap of around $3.35 trillion. Apple would require a stock price increase of just 20% to reach the coveted $4 trillion mark, bolstered by a variety of positive indicators.

In the fourth quarter of its fiscal 2024 (ending September 28), Apple recorded a 6% year-over-year sales growth and a 12% increase in adjusted earnings per share (EPS). Additionally, the number of active devices in use hit an all-time high, largely attributed to the recent launch of the iPhone 16, which includes Apple Intelligence, the company’s on-device AI feature. Notably, these results reflect only nine days of iPhone 16 sales, indicating potential for even stronger performance.

Ives highlights the economic landscape’s influence on consumer behavior, noting that significant numbers of iPhones—approximately 300 million—have not been upgraded in four years. This presents a substantial opportunity for Apple. The analyst estimates the company could sell up to 240 million iPhones in fiscal 2024, potentially initiating a significant sales cycle.

This reasoning is persuasive. With an improving economy and a loyal customer base, Apple’s entry into the $4 trillion club looks increasingly possible, especially with the new AI-enhanced iPhone.

3. Microsoft

Microsoft ranks as the third most valuable company, boasting a $3 trillion market cap, placing it 32% shy of the $4 trillion goal. The company proactively introduced Copilot, a suite of AI-enhanced productivity tools, alongside Copilot-powered PCs and AI models for its cloud service clients, allowing it to capitalize on the rising demand for AI solutions.

In the first quarter of its fiscal 2025 (ending September 30), Microsoft’s Azure Cloud recorded a 33% year-over-year growth, with AI services accounting for 12 percentage points of that growth—up from 8% in the previous quarter. This trend demonstrates the effectiveness of Microsoft’s AI strategy.

Ives believes Microsoft’s AI revenue could exceed a $10 billion run rate in Q2, with additional acceleration anticipated in the latter half of fiscal 2025. He also predicts that 70% of Microsoft’s clients will implement AI solutions within three years. This could drive significant stock growth.

It seems Ives has a strong argument; Microsoft’s diverse technology extends to both enterprise and consumer markets, putting it in a prime position to lead in AI offerings, which should contribute to its growth for years to come.

A word on valuation

Bloomberg Intelligence projects that the generative AI market may reach $1.3 trillion by 2032, with a compound annual growth rate (CAGR) of 42% over the next decade.

Despite the massive potential they are pursuing, Apple, Nvidia, and Microsoft are still competitively priced at 32 times, 30 times, and 28 times forward earnings, respectively. Given the context of this growing market, the investment potential becomes evident.

Don’t miss this second chance at a potentially lucrative opportunity

Have you ever felt like you missed the opportunity to invest in top-performing stocks? Here’s your chance.

Occasionally, our team of expert analysts issues a “Double Down” stock recommendation for companies they believe are on the brink of significant growth. If you are concerned that you’ve missed your opportunity, now may be your time to invest before it’s too late. The data supports this:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $23,324!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,133!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $420,761!*

We are currently issuing “Double Down” alerts for three outstanding companies, and there may not be another opportunity like this in the near future.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

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.

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