Change is one of the only constants investors will find on Wall Street . Thanks to a combination of innovation, acquisitions, mergers, bankruptcies, legal judgments, competition, and even Acts of God, the stock market's "leaderboard" is constantly in flux. This is to say that Wall Street's largest companies today aren't liable to hold their positions five, 10, or even 20 years from now.
Just six years ago, tech goliath Apple (NASDAQ: AAPL) made history by becoming the first publicly traded company to reach a $1 trillion market cap . By June 2023, it had crossed the psychological $3 trillion barrier.
Image source: Getty Images.
It took less than five years for the stock market's largest company to triple in value, which begs the question: Which hypergrowth company will be the first to double the current peak of a little over $3 trillion in market cap and reach a $6 trillion valuation?
While I'll give you my very clear prediction in a moment, let me work my way backwards and show why some of today's most-influential businesses within the " Magnificent Seven " aren't the answer.
Nvidia and Apple? No chance.
Considering that artificial intelligence (AI) is the hottest thing since sliced bread, you'd think AI kingpin Nvidia (NASDAQ: NVDA) would have the inside track to becoming Wall Street's most-valuable business. However, I've been pointing out for months just how many headwinds the ace of the AI movement is set to face .
Despite having superior AI-graphics processing units (GPUs) with top-notch compute ability, Nvidia's inability to satisfy all of its customers will open the door for external competitors to grab market share .
Likewise, all four of Nvidia's largest customers, which account for around 40% of its net sales, are developing AI chips of their own. Even if these chips are purely complementary to Nvidia's H100 GPUs, they're going to take up valuable data center space and lessen the need for Nvidia's hardware in the years to come.
The biggest worry might just be that every next-big-thing innovation over the last 30 years has navigated its way through a bubble-bursting event early in its existence . With most businesses lacking a clear gameplan with their AI investments, it looks probable that the AI bubble will burst sooner than later, and ultimately drag Nvidia down with it.
As for Apple, its growth engine has mostly stalled out . Net sales are up by about 1% through the first nine months of fiscal 2024 (Apple's fiscal year ends in late September). Although a record-breaking buyback program has been a major help to Apple's bottom line, it makes no sense for investors to pay a high multiple to earnings if Apple's sales growth is hardly above the flatline.
While subscription services continue to be a bright spot -- up 13.2% through the first nine months of fiscal 2024 versus the comparable period in 2023 -- lagging iPhone sales are liable to drag on Apple's share price.
Microsoft, Alphabet, and Meta Platforms? Possibly, but ample headwinds exist.
On the other hand, Microsoft (NASDAQ: MSFT) , Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) , and social media maven Meta Platforms (NASDAQ: META) do have a path to a $6 trillion valuation, but would need things to go just right for it to happen.
Microsoft enjoys sustainable moats and exorbitant cash flow from its legacy Windows and Office segments, and should deliver double-digit sales growth from Azure, the world's No. 2 cloud infrastructure service platform. With plenty of cash on hand, Microsoft can easily invest for the future via organic or inorganic means.
However, Microsoft is also heavily tied to the AI revolution via its investments in OpenAI, the company behind popular chatbot ChatGPT. If the AI bubble were to burst, as I expect it will, it could be hit harder than other "Magnificent Seven" members, aside from Nvidia.
Similar to Microsoft, Alphabet should benefit nicely from the growth of its cloud infrastructure service platform known as Google Cloud. Enterprise spending on cloud services is still in its early innings, which bodes well for this high-margin operating segment.
The only true knock I have against Alphabet is its strongly cyclical ties . With roughly 76% of its $84.7 billion in second-quarter sales derived from advertising, Alphabet will always be somewhat tethered to the health of the U.S. and global economy, as well as investor sentiment.
Comparatively, Meta Platforms is even more reliant on advertising . Just shy of 98% of its $75.5 billion in net sales through the first-half of 2024 have come from ads on its social media platforms.
Although long-winded economic expansions are a positive for Meta's ad-driven operating model, and the company's metaverse investments have a chance to pay off in a big way in the latter-half of this decade, its stock would have to quintuple in value to become Wall Street's first $6 trillion company. This seems a stretch given the potential for U.S. economic growth to slow in the coming quarters.
Image source: Amazon.
Wall Street's first $6 trillion stock is likely to be...
Though it's going to take some time -- i.e., don't expect the stock market's outsized annual returns to continue indefinitely -- my prediction is that Amazon (NASDAQ: AMZN) will cut the proverbial ribbon and cross the $6 trillion threshold before any other publicly traded company.
While most people have acquainted themselves with Amazon through its globally leading online marketplace, the nuts-and-bolts that generate the bulk of the company's operating cash flow have little to do with e-commerce .
First and foremost, Amazon Web Services (AWS) is the world's leading cloud infrastructure service platform. AWS held a 31% share of cloud infrastructure services spending as of the end of 2023, with annual run-rate sales topping $105 billion, as of June 30. This segment is consistently responsible for 50% to 100% of Amazon's operating income , and it should play a key role in doubling Amazon's operating cash flow by 2026.
Amazon is also just beginning to harness the value of its content via its Prime subscription service. Landing an 11-year streaming deal with the National Basketball Association (NBA), coupled with being the exclusive partner of Thursday Night Football , makes Amazon's video platform the wave of the future. It should have no trouble increasing Prime subscription prices, as well as generating boatloads of advertising revenue.
Speaking of advertising services, Amazon is seeing north of 3 billion visits to its website on a monthly basis. Since many visitors to Amazon are motivated shoppers, businesses are willing to pay a premium to get their message(s) in front of users. Not surprisingly, Amazon's advertising services segment has delivered year-over-year constant-currency sales growth of at least 20% dating back more than two years.
Even if the AI bubble bursts and takes Nvidia and Microsoft down with it, Amazon's various fast-growing ancillary channels can sustain double-digit growth.
What's more, investors willingly paid a median of 30 times year-end cash flow to own shares of Amazon stock during the 2010s. Investors in Amazon today are only paying 11.5 times forecast cash flow for 2025. If Amazon were to be valued at the same median cash-flow multiple it carried throughout the 2010s, and it continues to grow at its existing pace, it would have the clearest path to a $6 trillion market cap.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. 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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