U.S. companies have a history of creating more value than any others across the globe. The American economy continuously evolves, and different industries have taken turns at producing the world's richest corporations over the last century:
- In 1901, United States Steel became the world's first-ever $1 billion company.
- By 1955, General Motors was selling enough cars to warrant a $10 billion valuation, becoming the first company to pass that milestone.
- 40 years later in 1995, industrial conglomerate General Electric became the world's first $100 billion company by selling products including household appliances and aircraft engines.
- And in 2018, technology giant Apple amassed the most impressive valuation of all time when its market capitalization crossed $1 trillion. It remains the largest company today, valued at $2.7 trillion.
Since then, tech companies Microsoft, Amazon, Google parent Alphabet, and Nvidia have all joined Apple with valuations of more than $1 trillion.
So, which companies could be next? I'll share three top candidates that have genuine potential to join the stock market's most exclusive club before the end of this decade.
1. Meta Platforms could use artificial intelligence to create enormous value
Meta Platforms (META 0.80%) owns leading social media platforms Facebook, Instagram, WhatsApp, and Threads. The company is no stranger to the $1 trillion club: It was a member back in 2021, before it got bogged down in cash-burning projects like the metaverse. By late 2022, investors had slashed its valuation by 76% from peak to trough.
NASDAQ: META
Key Data Points
But Meta has bounced back with a vengeance. Its stock has soared 127% in 2023, on the back of the company's commitment to cost cuts and its use of artificial intelligence (AI) to reignite growth.
Its short-form video feature, Reels, is at the heart of its comeback. It's designed to compete with ByteDance's TikTok, which has dominated the attention of younger users over the last few years.
Meta is using AI to predict the type of content that users want to watch, and is then feeding them more of it to increase engagement. In the second quarter (ended June 30), its AI discovery engine was credited with a 7% increase in the time users spent on Facebook compared to a year ago. The company also said that the technology is responsible for a 24% increase in time spent on Instagram since Reels was launched.
Meta is also using AI to serve advertisers on its social media platforms. It has introduced generative AI tools capable of creating text and cropping images to produce more-effective ads. And it offers AI-powered predictive analytics to help businesses understand how ads might perform.
Meta's revenue and earnings have now returned to growth, much to the delight of investors who collectively value the company at $728 billion right now. Wall Street expects it to deliver $12.32 in full-year earnings per share in 2023, and based on its current stock price of $283.25, it trades at a forward price-to-earnings (P/E) ratio of 23.
Assuming that P/E remains constant, Meta will only have to grow its earnings by a modest 4.6% per year between now and 2030 to rejoin the $1 trillion club. Its performance so far this year suggests that won't be a problem.
2. Oracle is quickly becoming the go-to cloud provider for AI companies
Oracle (ORCL 0.86%) has a rich history as a titan of the technology sector. It was revolutionizing database management software in the 1970s and prepared companies for the internet age from the 1990s. Since then, it has been focused on cloud computing, especially after the launch of its Oracle Cloud Infrastructure business in 2016.
NYSE: ORCL
Key Data Points
The cloud happens to be a key piece of the AI equation, because it's where businesses store their valuable data, and that information is the nectar that feeds AI models. And the average business can't afford the computing hardware necessary to develop AI, so renting it from data center operators like Oracle is often their only option.
Speaking of which, Oracle has quickly become a leader in that very area. It has signed multiple deals with leading AI chipmaker Nvidia, and Oracle's chairman, Larry Ellison, says his company has the highest-performance, lowest-cost GPU clusters in the world. Its customers can scale up to a whopping 32,000 GPUs of computing power, allowing them to rapidly develop, train, and deploy AI.
In the fiscal 2023 fourth quarter (ended May 31), Oracle acquired more than 30 AI development customers, and they collectively committed to buying $2 billion worth of cloud computing capacity.
The company generated $49.9 billion in revenue during fiscal 2023, and it is currently valued at $316 billion. Based on those figures, its stock trades at a price-to-sales (P/S) ratio of 6.3. If that number remains constant, Oracle will have to grow its revenue by 17.9% per year between now and 2030 to justify a $1 trillion valuation.
Considering the company's revenue has a compound annual rate of 20.2% since its stock was listed publicly in 1986, I'm betting it has a great shot to join the trillion-dollar club.
3. Tesla has a lucrative opportunity in autonomous driving
By now, you have probably realized companies are applying AI in all kinds of different ways. Well, here's another: Tesla (TSLA +0.94%) is the global leader in the electric vehicle (EV) industry, but it has also developed one of the most-advanced fully autonomous self-driving software packages in the world. It could be released publicly later this year, and it has the potential to completely transform the company's economics.
NASDAQ: TSLA
Key Data Points
It could do that in two ways. First, Tesla will earn recurring revenue from each car with the technology installed. Software carries a much higher gross profit margin than car manufacturing because it can be developed once and sold an unlimited number of times. Second, CEO Elon Musk wants to build a ride-hailing network for Tesla's autonomous vehicles.
He says passenger vehicles are in use for only 12 hours per week on average, so they could generate a significant amount of income for customers by serving in an autonomous ride-hailing network during their downtime.
Musk thinks the combination of software sales and a revenue split from its ride-sharing business could boost the gross margin from producing each Tesla vehicle to 70% over the long term (from 25% today).
The company is valued at $675 billion as of this writing. Musk aims to increase EV production by 50% per year for the foreseeable future, which would be enough to propel the company to a $1 trillion valuation by 2030 even without the autonomous software piece.
But Cathie Wood's Ark Investment Management thinks self-driving technology could eventually become Tesla's most valuable asset. By 2027, Ark predicts its stock could rocket higher by 925% to $2,000 on the back of autonomous ride-hailing in particular.
As a result, Tesla has no shortage of positive catalysts on the horizon, and I think it's a great bet to join the $1 trillion club within the next few years.
