When 2004 came to a close, Exxon Mobil It was the largest publicly traded company in Standard & Poor’s 500with Citigroup and General Electric Also in the top ten. today, Microsoft(NASDAQ:MSFT) It is the only member of the Top 10 list at the end of 2004 that remains among the largest publicly traded companies in America.
Image source: Getty Images.
Since mid-2023, we have seen that apple(Nasdaq: Apple)Microsoft and the semiconductor giant Nvidia(Nasdaq: NVDA) All of them exceed the $3 trillion valuation plateau. Although Nvidia may seem like the safest bet to reach the psychologically important $5 trillion mark given the rise… Artificial Intelligence (AI)the dark horse candidate may have the clearest path to becoming Wall Street’s first company to be valued at $5 trillion.
On the one hand, there’s no denying that Nvidia has enjoyed textbook operating expansion. The company’s Hopper (H100) graphics processing units (GPUs) and subsequent Blackwell chips were the preferred choices for companies that wanted to run generative AI solutions and train large language models in their high-compute data centers.
With the huge demand for GPUs, Nvidia was able to get between $30,000 and $40,000 for its Hopper chip, which is four times as much. Advanced micro devices It charged customers for the Instinct MI300X GPU. Other pricing power helped push Nvidia’s gross profit margin to 78.4% last year.
While the long-term outlook for AI remains encouraging and this technology has real-world applications in most industries around the world, Nvidia’s chances of becoming Wall Street’s first $5 trillion company are likely to be stymied by history.
Nearly three decades ago, the Internet began to spread and provided businesses with a new way to communicate with potential customers. Although the Internet ultimately changed the growth trajectory of American businesses in a positive way, it took years before companies truly understood how to harness these new sales and marketing channels.
Including the Internet, every game-changing technology or innovation for 30 years has made its way through a bubble at an early stage. In simpler terms, investors constantly overestimate how quickly a new technology/innovation will be adopted or gain widespread benefit. With most companies lacking clear plans regarding how to maximize the return on their AI investments, this positions AI to be the next in a long line of bubbles.
Since no company has directly benefited from the AI revolution more than Nvidia, the logical expectation is that its stock will be hit the hardest. Historical precedent makes it unlikely that Nvidia will climb to a $5 trillion valuation first.
Image source: Amazon.
If the date coincides and the AI bubble bursts, it would also be bad news for Microsoft, which has been investing heavily in an AI-driven future. Although Microsoft’s operating cash flow is not as heavily dependent on AI as Nvidia’s, being the first to reach a $5 trillion valuation would be a stretch.
The same can be said about Wall Street’s other public company, Apple, which is valued at $3 trillion. Although Apple’s services business continues to grow by double digits, sales of its physical devices, including the iPhone, have been stagnant for two years. Apple shares are already trading at one of their most expensive valuations in a decade, leaving little room for its valuation to rise by another $1.4 trillion.
The component of the “Great Seven” that appears to have the clearest path to reaching a $5 trillion market value is the e-commerce giant’s powerhouse. Amazon(Nasdaq: AMZN).
When most consumers and investors hear the name Amazon, they think of its dominant online marketplace. Last February, eMarketer estimated that Amazon would account for just over 40% of online retail sales in the United States in 2024. While this online retail platform has been the face of Amazon for nearly three decades, e-commerce It plays a minimal role in terms of cash flow. Generation and operating revenues.
The lion’s share of Amazon’s growth potential (particularly growth in cash flow) stems from ancillary operating segments, with Amazon Web Services (AWS) leading the pack.
Based on data from technical analysis firm Canalys, AWS is the world’s leading cloud infrastructure services platform, with an estimated 33% share of total cloud spending during the third quarter of 2024. For context, Amazon’s share of spending among cloud providers is greater than Microsoft’s. Azure and alphabetgoogle cloud, total — They rank second and third in global spending on cloud services.
Although AI has played a role in AWS’s growth, enterprise spending on cloud services was growing at a steady double-digit pace long before AI became the most important thing since sliced bread on Wall Street. Although enterprise cloud spending is still in the relatively early stages of expansion, Amazon can expect much higher margins from this segment to significantly boost its cash flow.
Beyond AWS, Amazon’s advertising and subscription services segments (such as Prime) are also seeing double-digit growth, respectively. Amazon is moving towards exclusive sporting events (Thursday Night Football and NBA streaming packages) should improve demand for advertising, as well as support subscription pricing power.
The point is that, unlike Microsoft and Nvidia, Amazon won’t be dragged down by the bursting of the AI bubble thanks to an abundance of other catalysts.
Finally, Amazon remains historically inexpensive. Throughout the 2000s, investors willingly paid between 23 and 37 times year-end cash flow to own company shares. But as of the closing bell on January 10, Amazon shares are valued at just 13.5 times consensus cash flow for 2026. If Amazon reaches the average year-end multiple of cash flow that traded flat from 2010 through 2019, It would become the first Wall Street company to be worth $5 trillion.
Have you ever felt like you’ve missed out on your most successful stock buying journey? Then you’ll want to hear this.
On rare occasions, our team of expert analysts issues a “Double Bottom” stock. Recommendation of companies they think are about to emerge. If you’re worried about missing your opportunity to actually invest, now is the best time to buy before it’s too late. The numbers speak for themselves:
Nvidia:If you invested $1,000 when we doubled your money in 2009,You will have $352,417!*
apple: If you invested $1,000 when we doubled your money in 2008, You will have $44,855!*
Netflix: If you invested $1,000 when we doubled your money in 2004, You will have $451,759!*
We are currently issuing “double” alerts for three amazing companies, and there may not be another opportunity like this anytime soon.
Citigroup is an advertising partner of Motley Fool Money. Susan Frey, an executive 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. Sean Williams He has positions at Alphabet and Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends GE Aerospace and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
