In recent years, several U.S stocks reached market capitalizations near, at, or above $1 trillion. Now the question is – what will it take for these top valued stocks to reach $10 trillion?
The answer to this $10 trillion question varies from company to company. For starters, some members of the “trillion dollar club” have much further along on their way to reaching this lofty valuation level. Moderately-high (low-teens) annual gains over the course of a decade could get them to the finish line.
For other names in this category, they will need to stay high-potential trillion dollar stocks. That is, these companies will need to continue growing at an extremely rapid clip, in order to reach the $10 trillion mark within a reasonable timeframe.
Finally, there are some stocks that, while top-valued today, may have but a slim chance of “leveling up” significantly from their current valuation. According to Finviz, these are the seven largest U.S.-listed companies by market cap. Should you buy these top valued stocks, based on their chances of becoming the first top rated stocks to reach $10 trillion? Let’s find out.
Apple (AAPL)
The rebound among tech stocks has elevated Apple (NASDAQ:AAPL) shares not just back to their past high-water mark, but to new all-time highs as well. As a result, AAPL, the largest stock by market cap, now sports a $3 trillion valuation.
With this, AAPL stock is one of the trillion-dollar market cap stocks that only needs to moderately knock it out of the park in order to eventually hit $10 trillion. All the company may need to do is continue growing earnings by 10%-15% per year in the coming years.
Even if Apple fails to find success with some of its more moonshot endeavors, such as its proposed Apple car, as Louis Navellier has argued previously, the company’s Services segment could soon experience a growth resurgence. This may result in the level of overall earnings growth needed to get the stock up to the $10 trillion mark.
Microsoft (MSFT)
Microsoft’s (NASDAQ:MSFT) big move into the field of artificial intelligence (or AI) has enabled the company’s shares to experience a high level of price appreciation thus far in 2023. After rallying by around 41.8% since January, MSFT, the second-largest stock by market cap, now has a valuation of around $2.6 trillion.
Like AAPL, all it may require for MSFT stock to hit $10 trillion is to hit a moderately-high level of earnings growth as the 2020s play out. In fact, it could be even more attainable for Microsoft, assuming the “AI revolution” lives up to the hype.
As it continues to integrate the AI technology and know-how obtained from its $10 billion partnership with ChatGPT developer OpenAI, Microsoft may just well be able to realize exponential earnings growth. With this, consider MSFT one of the top contenders among top-valued stocks to reach $10 trillion.
Alphabet (GOOG,GOOGL)
Google and YouTube parent Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) comes in at number three on our list. Although GOOG stock has yet to re-hit its all-time high, shares have been lifted by the recent tech stock rebound. The stock now sports a market cap of around $1.6 trillion, making it (in theory) a possible future member of the $10 trillion club.
Then again, maybe not. While the company is catching up in AI, after Microsoft’s big advances in this area, it’s still unclear how much AI-enabled search will impact margins for its cash cow Google search segment. Hitting the levels of growth needed to reach $10 trillion could also prove challenging. Largely, because other segments, like Google Cloud and YouTube, are experiencing a growth slowdown.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the fourth-largest U.S.-listed stock by market cap. What are the odds that this $1.35 trillion company becomes one of top valued stocks to reach $10 trillion? Back in May, InvestorPlace’s Alex Sirois argued that international e-commerce expansion means a continued growth runway for the company.
More recently, InvestorPlace’s Samuel O’Brient detailed the big impact AI will have on Amazon’s AWS cloud computing unit. Yet while all of this points to larger earnings in the years ahead for the company, this alone may not get it to $10 trillion. Why? Valuation. AMZN stock today trades for 83.2 times earnings.
Hence, AMZN already prices-in a lot of its future earnings potential. $10 trillion is 7.4 times AMZN’s current market cap, yet Amazon may need to grow its earnings by a far greater magnitude to ultimately cross the $10 trillion finish line.
Nvidia (NVDA)
Like Amazon, Nvidia’s (NASDAQ:NVDA) high valuation may limit its potential to hit $10 trillion. It’s undeniable that the AI megatrend leaves this leading maker of AI chips well-positioned to experience high revenue and earnings growth.
However, at a forward earnings multiple of 55.3, for $1.06 trillion market cap NVDA stock to grow its valuation nearly ten-fold, the company really needs to beat expectations with its future earnings results. Previously, I’ve argued that high growth could continue in the coming year, especially as the tech slowdown eases.
But over a longer time frame, growth could decelerate. Right now, with the “AI arms race” underway, there may be an unsustainably-high level of demand for AI chips right now. In addition, Nvidia dominates the AI chip market today, but key rival Advanced Micro Devices (NASDAQ:AMD) isn’t afraid to try and grab a large piece of this market.
Tesla (TSLA)
In my view, forget about Tesla (NASDAQ:TSLA) becoming one of the top valued stocks to reach $10 trillion. Just maintaining its current market cap (around $824 billion) may prove to be a tall order for the electric vehicle (or EV) maker.
Why? Despite recent AI hype surrounding TSLA stock, analysts believe AI catalysts (if any) are already priced-in. Sure, alongside AI mania, shares have moved higher this year for another reason. Many investors believe that Tesla will sustain high levels of growth/maintain market share, thanks to its aggressive vehicle price cuts.
Yet while revenue rose 24% last quarter thanks in large part to lower vehicle prices, net income fell by 24% as well. If Tesla’s price war gambit keeps producing as many (if not more) negatives than positives, the market could become less inclined to give TSLA such a substantial valuation premium over other automotive stocks.
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A,NYSE:BRK-B), investor Warren Buffett’s holding company, is the seventh-largest U.S.-listed stock by market cap. From 1965, when Buffett first took over the company, through 2022, shares compounded at an annualized rate of nearly 20%.
This may suggest BRK.A stock (with a $740.8 billion valuation) will in time reach $10 trillion. However, while possible, back-of-the-envelope calculations indicate Berkshire, one of the top stocks for high market value investments, hits $10 trillion.
While Berkshire has compounded at a 20% clip across seven decades, its rate of appreciation has slowed down considerably in more recent years, given how much it has scaled up in size. Over the past decade, annualized returns have been around 11.75%. Assuming Berkshire isn’t broken up, if its shares continue to appreciate at an 11.75% clip, a $10 trillion market cap is 24 years away.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.