Well, it’s official: another company has surpassed it Apple‘S (NASDAQ: AAPL) Market capitalization. Last week, Nvidia became the second largest US company, behind only Microsoft.
It was another blow to Apple, whose sales are continuing stuck in neutral. And it’s facing a federal antitrust lawsuit.
Given Apple’s troubles and the impressive growth of some of its fellow tech megacaps, even more companies are likely to surpass Apple’s market value in the next decade. I expect Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) And Amazon (NASDAQ: AMZN) will be among them.
The case for Alphabet
At the time of writing, Alphabet has a market cap of $2.2 trillion, while Apple trails “only” $900 billion.
At first glance, that gap may seem insurmountable, but for a mega-cap, it’s completely feasible. For example, Nvidia recently closed a $1.8 trillion gap with Apple less than six months.
And Alphabet is up about 26% year to date, while Apple is up just 6%. That means the former has shrunk the latter’s lead by about $275 billion so far this year. If that trend continues, Alphabet will surpass Apple in size within a few years.
That power turns out to be expecting too much, but long-term, I do think Alphabet will catch up. First and foremost, Apple is one hardware company. It designs and sells computers, tablets, watches and smartphones. Alphabet, on the other hand, is one software company. His signature activity is searching the Internet via Google. It makes most of its money by selling digital ads. Crucially, digital advertising is cheap and easy to scale; mass production of physical electronics is not.
MoreoverApple has put its signature product, the iPhone, into the hands of almost every person who would want one. With an estimated 1.4 billion iPhones in use, there is little there is room to increase its share of that important market.
Conversely, Alphabet’s revenue grew by 15% in the first quarter. The company relies on digital advertising revenue (from its Google search business and YouTube), subscriptions gain (YouTube, Google Fiber) and data center revenue from the Google Cloud segment. These diversified revenue streams will help ensure growth continues well into the future.
Amazon
E-commerce and cloud services leader Amazon has a market capitalization of $1.9 trillion, which follows Apple with about $1.2 trillion.
But like Alphabet and Amazon have narrowed the gap this year. Amazon shares are up 22% year to date, of the market capitalization of the company increasing by about $300 billion, while Apple gained about $150 billion. If Amazon continues to close the gap at that rate, it could catch Apple in about four years.
That is not excluded. Amazon’s annual revenue is almost $600 billion, about the same as Sweden’s whole economy in 2022. Additionally, the company’s revenue is growing 13% year over year thanks to its extensive e-commerce operations and are leading cloud services division, Amazon Web Services (AWS).
Moreover, the pace and scale of advances in artificial intelligence (AI) could further accelerate that growth. AWS is a key driver of Amazon’s profits, and that segment is positioned to benefit from this revolution. AI-powered apps require enormous computing power, the kind that can only be provided by powerful data centers, many of which are operated by AWS.
Amazon is a technology juggernaut that will likely continue to grow – and grow faster than Apple.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions at Alphabet, Amazon and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple and Nvidia. The Motley Fool has a disclosure policy.
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