Microsoft, Apple, Nvidia and 8 Other Stocks That Could Be Worth $4 Trillion in Three Years

June 17, 2024

minute read

The first company to reach a $4 trillion stock market valuation might not be on your radar. While many expect one of the three largest U.S. companies—Microsoft, Apple, or Nvidia—to be the first to hit that milestone, it’s not a certainty.

‍

If these Big Tech companies continue to grow at the U.S. market’s historical average rate, they would each reach a $4 trillion market cap in just over three years. However, many Wall Street analysts anticipate that these companies will grow much faster, potentially reaching this valuation much sooner. For instance, if Nvidia's stock continues to appreciate at its recent pace, its market cap could hit $4 trillion by year-end. One analyst even projects Nvidia reaching $5 trillion next year.

‍

These optimistic projections might be overly ambitious. It's unrealistic to expect the recent rapid growth to continue indefinitely, and it’s unlikely that the current market-cap leaders will grow at the market's average rate. Historically, after stocks climb to the top of the market cap rankings, they tend to grow at a below-market rate. This trend is illustrated in a chart that tracks the performance of a hypothetical strategy investing each year in the U.S. stock with the largest market cap. This strategy significantly lags the S&P 500.

‍

Nvidia fans argue that the AI revolution is just beginning, and they believe Nvidia will lead this wave with significant annualized returns. However, if such potential is evident, it’s already reflected in the market price. For Nvidia to meet these high expectations, it would need to outperform its already optimistic projections. Currently, Nvidia’s stock price assumes an earnings per share growth rate of 70% annually over the next five years—a feat nearly unmatched in large-cap stock history.

‍

Top Dogs and Dark Horses

‍

Even if AI stocks continue to surge, it’s unlikely Nvidia will remain the leader in the coming years. This view is supported by a 2019 study by Research Affiliates, which analyzed stocks that had the largest market caps in their sectors across nine major stock markets over 40 years. The study found that nearly 80% of these "top dogs" underperformed their sectors over the next decade, trailing the average sector return by an average of 9.7% per year.

‍

Thus, it wouldn’t be surprising if a lesser-known stock became the first to reach a $4 trillion valuation. Predicting which stock that might be is challenging; if we could identify it now, it would already be trading near that level. However, numerous lower-ranked stocks could potentially rise to this level given favorable circumstances, similar to Nvidia’s recent surge.

‍

To illustrate, consider the market landscape three years ago. In June 2021, Apple led with a market cap of $2.28 trillion, followed by Microsoft at $2.04 trillion and Amazon at $1.73 trillion. Nvidia's market cap was just $498 billion. Few would have predicted Nvidia's market cap surpassing Apple's, as happened earlier this month.

‍

By projecting Nvidia’s past three years' return onto other S&P 500 stocks, one can speculate which might reach $4 trillion by June 2027 if they grew at the same rate. Besides the current top three, eight other stocks could potentially hit this milestone:

‍