Examine the Three Potent Growth Stocks Predicted by a Specific Wall Street Expert to Attain a Value of $4 Trillion by 2025
The significant advancement in technology lately is the development of artificial intelligence (AI). These advanced AI algorithms are predicted to bring about a surge in productivity by automating and simplifying labor-intensive tasks, leading to substantial profits for those who adopt this innovative technology.
The array of sectors that can leverage generative AI is almost limitless, leading major corporations worldwide to invest in this technology. Consequently, the value of these tech giants has escalated dramatically, with their market caps reaching even trillions of dollars. The financial sector is eagerly betting on which company will be the first to join the $4 trillion club.
According to Wedbush analyst Dan Ives, within the next six to nine months, three prominent companies will qualify for this exclusive membership, thereby enriching their shareholders.
Let's examine the leading contenders and factors propelling their growth.
Nvidia
Discussions on AI are incomplete without mentioning Nvidia (NVDA 4.45%), whose graphical processing units (GPUs) are essential for this technology. As a result, Nvidia has witnessed a remarkable surge in its sales and profits, ultimately leading to a spike in its stock price. With a current market cap of $3.4 trillion, Nvidia is the third most valuable company (at the time of writing). A mere 19% increase in stock price would secure its $4 trillion membership.
Nvidia GPUs are considered the paramount choice for generative AI, resulting in their widespread usage in AI processing data centers. In 2023, Nvidia reportedly controlled an impressive 98% of the data center GPU market, and this dominance likely continued in 2023. Major cloud service providers have indicated significant spending to advance their respective AI strategies, and the upcoming debut of Nvidia's AI-focused Blackwell chip has ignited anticipation that this trend will persist.
Ives believes that the market is still undervaluing the demand for Nvidia's products over the next 12 to 18 months and beyond. As the undisputed leader in the data center GPU market, Nvidia is well-positioned to capitalize on the ever-increasing adoption of AI. Moreover, the company's gross profit margin is at an all-time high, making Nvidia even more financially profitable, ensuring its inclusion in the $4 trillion club.
Microsoft
Currently, Microsoft (MSFT 1.14%) holds the position as the second most valuable company, with a market cap of $3.38 trillion. To surpass the $4 trillion mark, a mere 18% increase in stock price is necessary. Microsoft recognized the immense potential of AI and quickly moved to profit from it.
Microsoft's initial foray into AI resulted in the creation of Copilot, a suite of AI-enhanced productivity tools. However, Microsoft's ambition doesn't stop there. Microsoft recently launched analytics tools to help businesses measure the Return on Investment (ROI) related to AI spending, eliminating one of the main obstacles to AI adoption. Furthermore, Microsoft is working on bringing down the cost of AI computing for users, making it more accessible. Lastly, Microsoft is developing AI agents that focus on critical business applications.
Microsoft's AI revenue is expected to exceed a $10 billion run rate in the upcoming quarter. Ives estimates that 70% of Microsoft's installed base will adopt its AI solutions within the next three years, which would significantly boost sales and profits. Additionally, Ives suggests that for every $100 spent on Azure Cloud, Microsoft could generate an additional $40 annually. Given that Microsoft's intelligent cloud segment, which includes Azure, is projected to bring in $100 billion in the following year, this opportunity further illustrates the potential scale of the market.
Ives has assembled a convincing case. Microsoft's staying power in AI innovation is unmatched. Gaining traction in both the enterprise and consumer markets, Microsoft has a fertile landscape to exploit, ensuring its entry into the $4 trillion club.
Apple
Apple (AAPL -0.20%) has a history as the most valuable company worldwide, albeit momentarily losing this title on numerous occasions. Presently, Apple has a market cap of $3.73 trillion (as of the writing), a mere 7% away from the $4 trillion mark. Apple has several catalysts poised to push its value over this threshold.
The most significant growth driver, without a doubt, is the latest iPhone 16, which hit the market in mid-September. The iPhone 16 supports Apple Intelligence, unlocking a plethora of generative AI features for users. Apple CEO Tim Cook mentioned that the latest iOS 18.1 has twice the adoption rate compared to its predecessor, iOS 17.1, indicating a high level of user interest.
Recent economic challenges are gradually dissipating, leading to an improvement in consumer spending. Ives predicts that there are roughly 300 million iPhone users who have yet to upgrade their devices in more than four years. These trending economic conditions and AI capabilities have the potential to spark a highly anticipated "supercycle." Ives estimates that Apple could sell as many as 240 million iPhones in the upcoming year.
It seems like the analyst is spot-on with their prediction. The flourishing economy and the introduction of an AI-driven iPhone are perceived as the perfect elements to fuel Apple's sales, possibly cementing its place in the prestigious $4 trillion market cap club.
Affordable yet Valuable
Artificial Intelligence is currently experiencing a surge in growth, but experts believe there's still room for expansion. Global management consulting firm McKinsey & Company even estimates that the generative AI market could be worth anywhere between $2.6 trillion and $4.4 trillion in the forthcoming decade. As pioneers aiming to make AI accessible to all, our trio of corporations are well-positioned to capitalize on these projected gains, benefiting their shareholders.
Despite the enormous growth potential, it's interesting to note that Nvidia, Apple, and Microsoft are still quite reasonably valued, with price-to-earnings ratios of 32 times, 30 times, and 30 times, respectively, for the following year. The fact that they stand near the top of the leaderboard should not overshadow the massive opportunity that the expanding use of AI presents.
The rising demand for generative AI has led major corporations to heavily invest in this technology, including Nvidia, Apple, and Microsoft. Nvidia, for instance, has experienced significant growth in sales and profits due to its dominance in the data center GPU market, making its stock a potential investment for those looking to capitalize on the AI boom.
Investors are closely watching the financial sector's predictions regarding which company will be the first to join the $4 trillion club, with Nvidia being a strong contender due to its market leadership in AI technology and profitable financial position.
