One of the most important technological developments of recent decades is that of artificial intelligence (AI). These next-generation algorithms promise a groundswell of productivity gains by streamlining and automating time-consuming tasks, resulting in a real windfall for those who adopt this breakthrough technology.
The number of applications that can benefit from the addition of generative AI is virtually limitless, leaving many of the world’s largest companies lining up to stake their claim. The result has been a marked increase in the value of these technological heroes, as their market capitalization has soared into the trillions of dollars. Wall Street is making bets that someone will co-found the $4 trillion club.
That view may be short-sighted, said Wedbush analyst Dan Ives. The tech veteran says that in the next six to nine months, three household names will have earned their membership, thus benefiting shareholders.
Let’s take a look at the leading candidates and what will fuel their rise.
Nvidia GPUs are the gold standard for generative AI, making them a must-have in the data centers where AI processing takes place. Nvidia reportedly controlled 98% of the data center GPU market in 2023, and this dominance is likely to continue into this year. Each of the major cloud infrastructure providers has made significant expenditures to advance their respective AI agendas. Additionally, the upcoming debut of Nvidia’s next-generation AI-centric Blackwell chip is creating excitement that the trend will continue.
“Blackwell represents the next frontier for Nvidia and the overall AI revolution,” Ives wrote. “We believe that the Street continues to significantly underestimate the demand curve for the next 12 to 18 months and beyond.”
I think Ives is right about the money. As the unrivaled leader in the data center GPU market, Nvidia has the lead and will continue to benefit from the accelerated adoption of AI. An added bonus is that the company’s gross profit margin is near an all-time high, making Nvidia even more profitable. This will ultimately push the stock higher, virtually guaranteeing entry into the $4 trillion club.
Microsoft (NASDAQ: MSFT) is currently the second most valuable company in the world, with a market capitalization of $3.38 trillion. As such, the stock needs just an 18% gain to hit the $4 trillion benchmark. The company realized the enormous potential and worked quickly to capitalize on this opportunity.
The company’s early efforts yielded Copilot, Microsoft’s suite of AI-powered productivity tools, but that’s just the beginning. Microsoft recently released analytics tools to help customers measure return on investment (ROI) related to AI spend, eliminating one of the biggest hurdles to AI adoption. The company is also working to reduce the cost of AI computing for users, another major hurdle. Finally, Microsoft is developing AI agents that target mission-critical business applications.
Microsoft’s AI revenues are on track to surpass the $10 billion run rate this quarter. Ives estimates that 70% of Microsoft’s installed customers will adopt its AI solutions over the next three years, which would significantly increase revenue and profitability. He also calculates that for every $100 in current Azure Cloud spend, Microsoft could generate an additional $40 annually. To provide that context, the company’s intelligent cloud segment, which includes Azure, is expected to generate $100 billion over the next year, illustrating the scale of the opportunity.
Ives has clearly done his homework. Microsoft’s pace of AI innovation is unprecedented. Given its reach in the business and consumer markets, the company has a ripe field to plow, which should continue to drive growth and ensure its entry into the $4 trillion club.
Apple (NASDAQ: AAPL) has a long track record as the world’s most valuable company, and while it has relinquished the top spot on numerous occasions, its absence has been fleeting. The iPhone maker currently has a market cap of $3.73 trillion (at the time of writing), about 7% below the $4 trillion threshold. Apple has some clear catalysts that could push the company over the finish line.
The biggest potential driver, bar none, is the iPhone 16, which won’t hit stores until mid-September. While most new iPhone releases have the potential to move the needle, this latest version supports Apple Intelligence, which brings a host of generative AI features to the device. CEO Tim Cook suggested that these advanced capabilities are already capturing users’ attention. “(iOS) 18.1 has twice the adoption of (iOS) 17.1,” Cook said. “So that clearly shows that there is interest.”
The recent economic headwinds are starting to subside, and consumers unwilling to upgrade to the latest iPhone due to rampant inflation are finally letting go of their wallets. Ives estimates that there are about 300 million iPhones in the wild that haven’t been upgraded in more than four years. The improving economy and AI functionality could trigger a long-awaited “super cycle.” Ives estimates that Apple could sell as many as 240 million iPhones in the coming year.
“We believe the first member of the $4 trillion market cap club will be Apple,” Ives predicted, “as the iPhone 16 brings the AI revolution to Cupertino.”
I think the analyst hit the nail on the head. The improving economy, coupled with the new AI-powered iPhone, will be exactly the sales catalyst the company needs, likely helping Apple join the $4 trillion club.
AI is already growing by leaps and bounds, but experts say there is more to come. According to global management consulting firm McKinsey & Company, the generative AI market is expected to be worth between $2.6 trillion and $4.4 trillion over the next decade. As leaders in the quest to bring AI to the masses, our trio of companies are well positioned to reap the benefits for shareholders.
But despite the significant potential for future profits, Nvidia, Apple and Microsoft are still attractively priced: 32 times, 30 times and 30 times next year’s earnings, respectively. Apart from their positions at the top of the leaderboard, the opportunity presented by the growing adoption of AI cannot be ignored.
Consider the following before buying shares in Nvidia:
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Danny Vena has positions at Apple, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Meet the 3 supercharged growth stocks that will reach $4 trillion in value by 2025, according to a certain Wall Street analyst originally published by The Motley Fool
