A remarkably resilient economy and a lucrative AI boom are pushing America’s biggest tech companies toward milestones that seemed impossible just a few decades ago: Nvidia, Microsoft, and Apple are all worth more than $3 trillion, with Google and Amazon close behind in the $2 trillion range.
Combined, these five tech giants are now worth more than $14.5 trillion and make up about 32% of the S&P 500. For comparison, in 2002, when the dot-com bubble burst, the market capitalization of all U.S. stocks was $11.1 trillion, according to data from Siblis Research. The performance of tech giants has been particularly impressive this year, with Nvidia, for example, soaring from a market capitalization of $2 trillion to $3 trillion in less than 100 days.
That raises the question: which tech giant will be the first to reach the next big milestone: $4 trillion in market cap. Some bears argue that the record performance of big tech companies won’t last forever, given rising valuations and a slowing economy. Meanwhile, bulls believe this is just the beginning of an AI-fueled winning streak for big tech companies.
“A year later, we [will] “There are three companies with a market cap of $4 trillion: Nvidia, Apple and Microsoft,” said Dan Ives, a technology analyst at Wedbush. luck.
He argued that many of his Wall Street peers continue to underestimate the AI revolution and the health of the U.S. economy. “You can’t spot a recession without a telescope. And what about the Fed? Their next move is to cut rates, not raise them. So to me, all signs are bullish,” he said. “It’s 9 p.m. and the party goes on until 4 a.m. … The haters will continue to hate and say this is a bubble.”
NVIDIA
Of course, there are differing views on the direction of big tech companies, but many experts are convinced that semiconductor giant NVIDIA will be the first company to reach the $4 trillion market cap mark, driven by insatiable demand for AI-enabled hardware.
“The first person to get there will likely be the godfather of AI Jensen.” [Huang] “And because NVIDIA is the only one. Their GPUs are like the new oil or gold in the tech world with no real competition,” Ives said.
Nvidia’s shares have risen roughly 160% so far this year and more than 3,000% over the past five years, leading some analysts to warn that the tech giant’s valuation is overvalued and doesn’t take into account growing competition in the semiconductor market.
“The COVID-19 pandemic is a big step forward for the company,” said David Trainor, founder and CEO of research firm New Construct. luck“NVIDIA’s valuation is outrageous,” Sean Tully wrote last month. “The company faces the same curse as Tesla. But as soon as Tesla started to turn a profit, a bunch of competitors entered the EV space, eating into margins and slowing sales. The same will happen with NVIDIA.”
But Ives noted that even as Nvidia’s stock price has soared, the company’s revenue and profits have followed suit. Nvidia made record revenue of $26 billion and net income of $14.8 billion in the quarter that ended in April of this year. In the same quarter in 2021, the company’s revenue was just $5.8 billion and net income was $1.9 billion.
Luis Navellia, founder and chairman of family office Navellia & Associates, also dismissed the competition argument, arguing that Nvidia essentially has a “monopoly” on major AI chips, which should lead to steady revenue and profit growth for years to come. “And Jensen is kind of the new Elon, and he’s got a kind of cult status,” he said, adding that that will continue to drive retail investment in the company’s shares.
Nvidia’s market cap as of July 5: $3.14 trillion
Microsoft
Microsoft’s fast-growing cloud business and big investments in ChatGPT developer OpenAI have boosted the company’s stock price over the past few years, but it’s the company’s diversified and sustainable revenue streams that are driving its market capitalization to $4 trillion, according to Tim Pagliara, founder and chief investment officer of independent asset management firm CapWealth.
He said the current AI “frenzy” may see Nvidia reach the $4 trillion milestone first in the short term, but that Microsoft will be the “more sustainable” $4 trillion company.
“They’re embracing AI, but they have so many other plans. As a small business owner, I’m happy to continue to pay the per-user fee per month for everything from Azure to the additional add-ons they’ve created for security and so on,” he added, referring to Microsoft’s Azure cloud computing business.
Pagliara also sees Microsoft’s big tech business model as risky. Apple relies on consumers buying new iPhones every few years, and Nvidia benefits from a lack of competition in the short term, he said. Microsoft, on the other hand, has multiple avenues for consistently growing revenue, from its Azure cloud business and Office 365 to Windows and Linkedin.
Market cap: $3.48 trillion
apple
When it comes to long-term prospects, Apple ranks high on many analysts’ lists because of its potential to use AI to persuade customers to upgrade their current phones and attract more iPhone customers. Apple may not be the first company to reach a $4 trillion market cap, but bulls say it will get there soon.
“I think Apple will have the largest market cap over the next two to three years because they have 2.2 billion iOS devices,” Ives predicts. “Consumer AI will break through Cupertino’s wall. They’re just at the beginning of an AI-driven super cycle.”
Louis Navellier is also optimistic about Apple’s future, but said the company needs some “small leaps” to get more customers to buy the new iPhones.
He cited new AI tools and the possibility of a foldable iPhone as examples: “I don’t know if it’s coming out in September, but if it is, it’s going to be a $2,500 phone, and sales will explode and the stock price will soar.”
Market cap: $3.46 trillion
What about Alphabet and Amazon?
Google’s parent company is currently valued at $2.36 trillion, still far from the $4 trillion mark. Analysts say Alphabet could benefit from the AI revolution, but it’s been left behind by its illusory failures and its cloud business isn’t doing as well as others. But recent reports suggest the search giant is scooping up talent from its peers in an effort to catch up.
Amazon is in a similar situation; the company recently topped the $2 trillion market cap mark, but experts expect it will take time for its stock to nearly double. Wedbush’s Ives argued that Amazon’s cloud business, AWS, also lost out to Microsoft. “I think it was arrogant to underestimate what Nadella and Microsoft were doing. It’s a bit of a blow for Amazon, given that their competitor is across town and in the 2-0-6 area code,” he said.
Veteran tech analysts say Amazon is also a “lazy player” when it comes to AI, but Ives noted that CEO Andy Jassy is making changes to the company’s cloud business that could give Amazon more of a leg up on AI given its vast customer base.
Of course, all of the tech giants on this list face risks: antitrust regulation, cyberattacks, an economic slowdown, and cuts in AI spending all need to be considered. But for now, the bulls are staying bullish, and they think you should be too.
“The spreadsheet- and valuation-obsessed tech bears will remain in hibernation mode,” Ives said. “But after this AI party, when everyone gathers for breakfast at 6 a.m., the bulls will [will have] We won and the Bears look smart.”
