Recent years have seen a tectonic shift in the top echelons of the market, showcasing the ascending dominance of tech behemoths. The likes of Apple and Microsoft are now unrivaled in their class, each boasting a staggering $3 trillion market cap (as of Thursday morning). This seismic shift underscores the pervasive dominance of technology, with seven of the top 10 market leaders being industry titans in this sector.
The unyielding ascent of generative artificial intelligence (AI) has been a substantial driving force behind stock market gains over the past year. The profound potential for widespread productivity gains has set off a fervor, accelerating the prospect of the next cohort of “three trillionaires.” Envisioning this future, there are two stocks poised to ride the swelling demand for AI and secure their place in this exclusive club within the next seven years, if not sooner.
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A Strong Contender: Nvidia
Nvidia‘s (NASDAQ: NVDA) current market cap stands at $1.54 trillion, reflecting its potential to ascend to the $3 trillion club. While the timeline for this ascent is a matter of debate, a mere 95% surge from the closing price on Wednesday would propel the stock to this elite stratum by 2030, constituting an attainable annual growth of 10%.
The road ahead is not without its challenges. Nvidia’s recent surging stock price, soaring 239% in the past year alone, presents a formidable headwind. However, its indispensable role in the realm of AI is undeniable. The company has notched up triple-digit year-over-year revenue and profit growth in each of the last two quarters, with management foreseeing a continuation of this trend.
Nvidia boasts mastery in several markets, each representing a thriving opportunity. Despite an industrywide slump following record sales during the pandemic and the subsequent downturn that spanned almost three years, the long-reigning leader in discrete desktop graphics processing unit (GPU) space is now witnessing a rebound in GPU shipments, positioning Nvidia for an upward trajectory.
However, it is the fusion of AI and cloud computing that holds the potential to propel the company to unprecedented altitudes. Nvidia has cemented itself as the benchmark for AI, serving as the linchpin for data transference. The company commands an estimated 95% share of the GPU data center market, the bedrock of cloud computing, as per CFRA Research analyst Angelo Zino. Furthermore, Nvidia dominates the realm of processors for machine learning, a staple tool in AI techniques, with a projected market share of 95%, according to New Street Research. It is this impressive pedigree that rendered Nvidia the natural choice for propelling generative AI.
Albeit varying, projections estimate at stake trillions of dollars. While Morgan Stanley discerns a $6 trillion prospect in generative AI, Goldman Sachs value the market at $7 trillion. As the premier provider of AI processors, Nvidia stands perched at the vantage point.
Data centers and cloud infrastructure providers are racing to bolster the capacity of their systems to meet the computational needs of generative AI. This trajectory is expected to persist for years, endowing Nvidia with the propulsion to vault into the $3 trillion realm.
Amazon: The Powerhouse Awaiting the Summit
Amazon (NASDAQ: AMZN) currently commands a market cap of $1.63 trillion, poised to potentially ascend to the $3 trillion domain. Merely an 85% surge from the closing price on Wednesday is all that stands between the stock and this watershed, translating to a feasible annual growth of 10% leading up to 2030.
The company can draw on numerous stimuli to catalyze its impending growth. The prolonged surge in inflation compelled individuals to make tough choices to make ends meet, thereby dampening consumer outlay. This, in turn, impacted Amazon’s industry-dominating e-commerce operations. Signs of a recovery are now apparent, with Amazon recording an 11% uptick in its e-commerce sales in the initial three quarters of 2023. A further revivification of the economic landscape could fuel additional impetus.
The global e-commerce arena is anticipated to witness a surge exceeding 9% in 2024, breaching $6.3 trillion. As the foremost digital retailer globally, Amazon is primed to ride this swell in e-commerce activity.
Additionally, the company is charting new trajectories in digital transformation, chiefly powered by cloud computing. Amazon Web Services (AWS) leads the global spectrum in cloud infrastructure services, commanding a 31% market share, as per data furnished by market analytics firm Canalys. Following a contraction in cloud spending by numerous businesses amidst the economic downturn, a resurgence in growth is now underway. Cloud services expenditure bolstered by 16% in the third quarter of 2023, with further acceleration on the horizon as economic conditions brighten. As the torchbearer in this domain, Amazon stands to reap the dividends of this trend.
Possibly the greatest growth driver for Amazon lies in generative AI. The technology has proven its efficacy in summarizing and
The AI Push: Amazon’s Momentum Towards the $3 Trillion Club
In a world where artificial intelligence (AI) applications are revolutionizing industries, companies are scrambling to embrace AI’s potential. The sheer spectrum of AI’s applications spans from automating responses to emails and drafting code to searching the internet for information, making AI adoption a fervent race. However, constructing these intricate systems from the ground up entails exorbitant expenses, alongside the colossal quantity of data required to train fundamental generative AI models.
The Rise of Cloud Providers in Generative AI Services
Henceforth, cloud providers, particularly AWS, are primed to deliver generative AI services to users. Amazon, already furnishing a myriad of these models, has launched an expanding suite of tools to assist its cloud consumers in leveraging AI’s prowess.
The e-commerce market’s resurgence, a rebound in cloud expenditure, and the increasing assimilation of AI bode well for Amazon’s trajectory towards the $3 trillion club.
Investment Insight: Nvidia’s Prospects
Is an Investment in Nvidia Valuable?
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John Mackey, the former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Danny Vena holds positions in Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Goldman Sachs Group, Microsoft, and Nvidia. The Motley Fool adheres to a disclosure policy.
