Geoffrey Seiler, The Motley Fool
6 min read
In This Article:
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Amazon has a clear path toward a $3 trillion market cap through its cloud computing growth and AI investments.
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While it faces some obstacles, Alphabet has the right collection of businesses to hit $3 trillion in the next few years.
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The combination of AI and serving ads on WhatsApp and Threads should help drive Meta Platforms to a $3 trillion market cap in the coming years.
While not all have stayed there, there have been three tech giants that have crossed the $3 trillion market cap threshold: Microsoft, Nvidia, and Apple. The more compelling question now is: which companies are best positioned to be the next to join the $3 trillion club? In my view, the most likely candidates are Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), and Meta Platforms (NASDAQ: META).
Let's take a closer look at these three stocks and see what it will take for them to get there.
With nearly a $2.3 trillion market cap, Amazon is the closest company to join the $3 trillion club. It would need to see its stock price rise by about 33% to reach this exclusive club. The probability of this happening in the next few years looks promising.
The company is the market leader in two important fields: cloud computing and e-commerce. Its cloud computing unit, Amazon Web Services (AWS), is its largest business by profitability. It's also its fastest-growing segment, with revenue jumping 17% last quarter.
AWS is benefiting from the trend in artificial intelligence (AI) in two main ways. One is that customers are flocking to use its services, such as Bedrock and Sagemaker, to help customize, build, and deploy AI models and apps. They are then running them on its data center infrastructure, leading to a nice recurring revenue stream. Amazon has also developed its own custom AI chips through an in-house subsidiary, which helps give it a cost advantage. With the company investing heavily in AI infrastructure to keep up with demand, this is a nice advantage.
Amazon's e-commerce business, meanwhile, is a solid high single-digit to low double-digit revenue grower. However, the company is using AI to help make both its logistics and warehouse operations more efficient, which is leading to lower costs and increased profitability in this segment. It is also using AI to help power its high-margin sponsored ad business, which has become the fastest-growing part of its e-commerce segment.
With Amazon's stock trading at one of the more attractive valuations in its history, the path to hitting $3 trillion over the next few years looks pretty clear, barring a big recession.
