This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
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.
1. Amazon ($2.3 trillion market cap)
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.
2. Alphabet ($2.1 trillion market cap)
Not trailing far behind Amazon in market cap is Alphabet at just over $2.1 trillion. To reach $3 trillion, the stock would have to rise a little more than 42% from current levels. While I think the likelihood of this happening in the next few years is high, the company admittedly has some obstacles as well.
The biggest hurdle to Alphabet reaching a $3 trillion market cap would be if the company faced harsh penalties from its antitrust trial, such as having to sell off its Chrome browser or Android smartphone operating systems or even being forced to break up. However, it does appear that U.S. District Judge Amit Mehta is leaning more toward lighter penalties, given the rise of AI competition.
Therein lies the other risk for Alphabet, with new competition coming from AI chatbots like ChatGPT and Grok, as well as AI-powered search engines from companies like PerplexityAI. Investors are worried about the impact that AI will have on Google's search dominance, and there is certainly a shift occurring.
However, Google does have a couple of nice advantages. First, it has strong distribution through Chrome and Android, as well as deals to be the default search engine on Apple devices and other browsers. Second, Alphabet has spent decades building one of the most expansive ad networks on the planet, which allows it to serve both major brands and small local businesses.
Meanwhile, the company is no slouch in AI. Its Gemini model has received strong benchmark scores, and it's been focusing on AI features that will help with monetization, such as virtual outfit try-ons and agentic AI-powered checkout. While many AI start-ups will be struggling to scale and turn a profit, Alphabet is well positioned to turn its AI investments into earnings much sooner.
Throw in Alphabet's fast-growing cloud computing business, its emerging Waymo robotaxi business, and leading YouTube streaming platform to go along with one of the cheapest valuations in the mega-cap tech space, and the company has a solid path to joining the $3 trillion market cap club.
3. Meta Platforms ($1.8 trillion market cap)
With a market cap of just under $1.8 trillion, Meta Platforms has the most work to do to get to a $3 trillion market cap. The stock would have to climb about 72% from current levels to join the exclusive club. However, I would not count it out.
Meta Platforms was the fastest-growing of the the three companies last quarter, with its revenue jumping 16%. AI is helping power its results, with the company seeing increased user engagement and better ad performance being driven by its proprietary Llama AI model. This, in turn, is leading to more ad inventory and higher prices. Last quarter, ad impressions rose 5%, while ad prices jumped 10%.
However, what can really drive Meta's stock forward to that $3 trillion market is new monetization opportunities. Just this month, the company announced it will begin to serve ads on its popular WhatsApp messaging platform. With more than 3 billion monthly users, including more than 100 million in the U.S., these new ads represent a huge opportunity. The ads will appear in the status section of the messaging app and will be visible through the updates tab.
In addition, the company is in the midst of building out another social media platform called Threads. The platform is growing quickly and has more than 350 million active monthly users, as last reported. It has also just started to gradually serve ads on Threads, as well.
Between more ad inventory, higher ad prices due to improved effectiveness, and Meta just beginning to serve ads on two platforms it hasn't served ads on before, the company has the opportunity to reach the $3 trillion mark in the next few years.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
