Microsoft , Apple , and Nvidia are the world's three most-valuable companies, and they are the only ones in history to surpass $3 trillion in market capitalization. They will probably continue to grow long into the future, especially if artificial intelligence (AI) lives up to expectations.
The global economy generated $105 trillion in output last year, but Wall Street thinks AI could significantly boost that figure:
- Goldman Sachs believes AI will create $7 trillion worth of economic activity within the next decade.
- PwC thinks AI will add $15.7 trillion to the global economy by 2030, with almost half of those gains coming from its ability to improve existing products.
- Ark Investment Management is the most bullish on AI, predicting software like OpenAI's ChatGPT could drive a productivity explosion worth $200 trillion to the world economy.
If those forecasts prove to be accurate -- even at the lower end -- I think Oracle (NYSE: ORCL) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) will grow to become two of the world's most valuable companies over the next 10 years. Here's why.
Image source: Getty Images.
1. Oracle: Industry-leading AI infrastructure
Nvidia is the quintessential AI play right now, because its graphics processing units ( GPUs ) for data centers are essential to building AI models. CEO Jensen Huang says data center operators could generate $5 in revenue (over four years) for every $1 they invest in his company's chips, because demand for computing power is so high among AI developers.
That brings me to Oracle, which offers some of the best AI data center infrastructure in the world. It developed unique RDMA (random direct memory access) networking technology, which moves data from one point to another significantly faster than competing Ethernet networks, translating to faster AI development at a lower cost.
Plus, Oracle's SuperCluster technology will soon allow developers to scale their computing capacity up to 65,536 Nvidia GPUs. By comparison, the best infrastructure at Amazon Web Services currently offers clusters of up to 20,000 GPUs, so Oracle could become the go-to destination for developers building the largest, most complex AI models .
Speaking of which, Oracle's remaining performance obligations (RPOs) soared 44% year over year to a record $98 billion during the recent fiscal 2024 fourth quarter (ended May 31), which included $12.5 billion worth of new AI deals. Leading AI start-ups like OpenAI and Elon Musk's xAI are just a couple of the developers waiting in line for more computing capacity from Oracle.
The company reports data center revenue under its Oracle Cloud Infrastructure (OCI) segment. It brought in just $2 billion during the quarter (up 42%), which puts the enormous backlog into perspective. The company is building new data centers to meet demand, which will convert its RPOs into more OCI revenue. Management expects gross profit margins to expand as it opens more locations thanks to their highly automated nature.
Oracle is valued at $399 billion as of this writing, but its stock trades at a heavy discount to the AI leaders. Microsoft, Apple, and Nvidia trade at an average price-to-earnings (P/E) ratio of 49.7, whereas Oracle's P/E is just 26. I'm not suggesting this will happen, but in theory, its stock will have to rise 91% just to catch up. That would catapult its valuation to $762 billion.
Oracle has grown its earnings at a compound annual rate of 8.9% over the last 10 years. But the sheer growth in the company's RPOs could drive an above-trend earnings expansion for years to come, especially since margins are expected to improve with scale.
If, for example, earnings grow by 15% annually over the next 10 years and its P/E trades in line with other AI giants, its market cap could top $3 trillion. Wall Street already forecasts 15% earnings growth in fiscal 2026.
Several assumptions need to become reality for the above scenario to play out, but joining the trillion-dollar club in general would make Oracle one of the world's largest AI companies.
2. Alphabet: A world-class AI software company
Alphabet is the parent company of tech titans like Google, YouTube, Waymo, and DeepMind. The conglomerate is already valued at $2.3 trillion, so it doesn't have to create quite as much value as Oracle to be one of the world's largest companies in 2034. However, it does have to overcome AI-related disruptions to its core business.
Google Search is responsible for more than half of Alphabet's total revenue. It's an attractive destination for advertisers because of its dominant 91% market share in the internet search industry.
But AI chatbots like ChatGPT pose a threat because they offer a faster, more direct, and more convenient way to get information. Microsoft integrated ChatGPT into its Bing search engine for that specific reason.
Alphabet has launched a series of its own AI chatbots over the past year, culminating in the Gemini family of models, which are its most advanced to date. Plus, generative AI is handling a growing number of queries on Google Search by producing text-based responses at the top of the page to save users from sifting through web pages for answers.
Early signs suggest this is protecting Google's dominance, because its advertising revenue jumped 14.3% year over year during the first quarter of 2024 (ended March 31), which was the fastest growth in almost two years.
Outside of search, Gemini is opening the door to several new opportunities. For example, Google Workspace is a popular productivity platform featuring Gmail, Docs, Sheets, and more.
Businesses pay $12 per user, per month for the Workspace standard plan, but they can now add Gemini for another $20 per user, per month. It serves as an AI assistant capable of rapidly creating text content and images, which can boost productivity within any organization.
More than 9 million businesses pay for Workspace (with several individual users within each one), so Gemini could become a substantial financial opportunity for Alphabet.
Like Oracle, Google Cloud also offers powerful AI data center infrastructure to the developer community. Plus, its platform features more than 130 ready-made large language models (LLMs), including Gemini, which developers can use to create their own AI applications.
Alphabet says more than 60% of generative AI start-ups are Google Cloud customers, and it's looking to grow that number by offering Nvidia 's latest GPUs in addition to chips Alphabet designed in-house.
The stock trades at a P/E of 29.4, so it's cheaper than the AI leaders on average. The company grew its earnings by 27% in 2023, and Wall Street expects growth to remain above 20% in 2024.
At that pace, Alphabet will likely be one of the largest AI companies in 10 years' time. Even if the company's earnings growth averages 10% over the next decade, it would amass a market cap of $6.5 trillion as long as its current P/E remains constant.
Suzanne 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Goldman Sachs Group, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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