Race to $4 Trillion: Which Tech Giant Will Win?

Analysts Notebook joined discussion · Jun 14, 2024 17:21

The race to $4 trillion is on. $Apple (AAPL.US)$, $Microsoft (MSFT.US)$ and $NVIDIA (NVDA.US)$ are in the $3 trillion club. So, which technology behemoth can adapt to keep growth rates elevated enough to keep the good times going?

We believe over the next year the race to $4 Trillion Market Cap in tech will be front and center between Nvidia, Apple, and Microsoft," wrote Wedbush analyst Daniel Ives in a research note.

Race to $4 Trillion: Which Tech Giant Will Win?

Nvidia?

Nvidia could reach a $4 trillion valuation first, driven by its rapid growth and dominance in AI spending.

Undoubtedly, Nvidia's blistering triple-digit sales growth puts the GPU kingpin on another planet. As Nvidia climbs in altitude, it will face less resistance and continue to power through $4 trillion, $5 trillion and beyond. It achieved a $3 trillion market cap just three months after hitting $2 trillion, much faster than Apple and Microsoft, which took 719 and 650 trading days, respectively. Nvidia's success hinges on continued demand for its graphics processing units and its competitive edge in software and chip innovation. This outlook is strongly supported by market analysts.

I believe Nvidia can keep powering ahead and I expect the stock to pass $4 trillion in market capitalization this year, and to reach $5 trillion next year." said Louis Navellier, founder of Navellier & Associaties.

Despite potential antitrust investigations, Nvidia's monopoly status and robust earnings projections — along with positive analyst revisions—support its upward trajectory. Nvidia's strategic moves and consistent performance suggest it will not only achieve these high valuations but maintain them.

Apple?

Apple revealed its highly anticipated AI strategy at the Worldwide Developers Conference (WWDC), which Wedbush analysts called a "historic week for the tech world." Following the AI announcement, Apple shares surged over 7%, indicating growing investor confidence in the company's AI advancements driving consumer adoption over the next year.

Read Here: Apple Debuts AI Innovations at WWDC and Shares Hit Record High

The analysts highlighted two key aspects of Apple's AI strategy with significant potential. First, the AI rollout is expected to spark a super cycle, as around 270 million of the 1.5 billion iPhones worldwide haven't been upgraded in over four years. Second, developers are set to create hundreds of apps on Apple's AI platform, potentially leading to a new AI App Store that could become the main way consumers interact with generative AI in the future.

Read Here: In One Chart | Analysts Bullish on Upgrade Cycle - Will Apple Continue Its Rally？

Taking this a step further, we believe eventually this will lead to a bundled subscription service for Apple around higher end AI capabilities that will be another major catalyst for the Services segment over the coming years," analysts at Wedbush noted.

NewStreet Research analyst Pierre Ferragu recently argued that Apple could reach a $4 trillion valuation, citing its historical success in navigating technological shifts.

Microsoft?

Microsoft is partly an AI infrastructure investment due to its cloud-computing division. Additionally, it offers AI software to both businesses and consumers, alongside a wide array of other services and products. The company could also gain from its stake in ChatGPT developer OpenAI.

Microsoft is poised to be the first to reach a $4 trillion valuation if AI primarily benefits businesses seeking automation advancements.

Most notably, the Azure cloud business, which stands to benefit from greater AI usage as a whole, could be next in line to excite. Pierre Ferragu of NewStreet Research thinks a $4 trillion valuation makes sense as Microsoft seeks "achieving the Nirvana of execution." That entails "higher profitability" and "rapid and steady market share gains."

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Source: Microsoft, Barron's, MarketWatch, InvestorPlace, Investopedia

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