These AI-powered companies are all within reach, but their path to $4 trillion could look very different.
Three AI-powered stocks currently dominate the top of the market. Nvidia (NVDA -3.22%) has soared over the past 18 months, briefly surpassing both Microsoft (MSFT 0.92%) And Apple (AAPL -1.04%) as the most valuable company in the world.
After Friday’s close, Microsoft had the highest market capitalization at $3.34 trillion, followed by Apple at $3.18 trillion and Nvidia at $3.11 trillion.
All three are within reach of $4 trillion, but investors may be wondering which stock has the best chance of getting there first.
The case of Nvidia
Nvidia’s financial results have been fueled by the ongoing arms race in artificial intelligence (AL). Big tech companies are buying as many Nvidia chips as they can get their hands on, prompting Nvidia to raise prices as supply struggles to keep up with demand.
Nvidia’s first-quarter revenue of $26 billion was up 262% from a year ago, and its gross margin increased 13.8 percentage points to 78.4%. . This fueled a massive 629% increase in earnings per share (EPS).
There aren’t many signs of slowing down in the coming months either. Management’s second-quarter outlook of $28 billion in revenue and 74.8% gross margin suggests another strong result. Meanwhile, big tech companies, including Microsoft, MetaplatformsAnd You’re here all shared plans to increase their AI data center spending, which includes major purchases from Nvidia.
But the long-term outlook is less certain. Nvidia has a large concentration of its sales with only a handful of customers. A customer represents 13% of its direct sales and an indirect customer represents 19% of the total turnover. Meanwhile, these big customers, including Microsoft, Meta and others, are all designing and deploying their own AI chips for their data centers. Once manufacturing is scaled up, these chips could ultimately be a more cost-effective solution for their data centers, reducing their orders from Nvidia.
Nvidia’s near-term potential remains high, but the long term is murky to say the least.
The case of Microsoft
Since the 1990s, Microsoft has consistently established itself as one of the largest companies in the world. The company has followed the evolution of the technological landscape throughout its history and early on bet on the leader in generative AI, OpenAI, which helped consolidate its position in the field of artificial intelligence.
Microsoft’s early bet on OpenAI and its integration with its Azure cloud computing platform made it the de facto choice among developers looking to use its large language models (LLMs). Azure OpenAI Service helped fuel Microsoft’s cloud computing revenue up 31% year over year in the most recent quarter, with 7 points of growth coming directly from AI services.
Microsoft also uses OpenAI’s models to power its Copilot functionality in its enterprise software offerings. The service has seen strong adoption with over 1.8 million paying subscribers, representing 35% quarter-over-quarter growth. It surpassed 400 million paid Office 365 seats earlier this year, so it still has huge room to grow the service.
As a leading enterprise software company and one of the few hyperscale cloud platforms, Microsoft’s revenue appears secure. The company is investing heavily in building Azure data centers as demand for AI computing continues to grow, and it is expected to see a strong return on capital as it also integrates AI capabilities across its entire software suite. Its position as a leading player in two massive markets should allow it to eventually reach a market capitalization of $4 trillion.
The case of Apple
Apple revealed its AI efforts earlier this month at its annual Worldwide Developers Conference (WWDC). CEO Tim Cook has promised to “innovate” in AI this year. Whether Apple’s new AI features constitute revolutionary innovations remains up for debate, but one thing everyone seems to agree on is that Apple has done something only Apple can do.
Apple is seamlessly integrating its new generative AI features into the iPhone and its other devices. Siri will be much more capable than in the past, acting more like a personal assistant to help you remember things and schedule appointments. Other generative AI features will make workflow on Apple devices faster and more efficient. Apple has also developed a way to integrate OpenAI’s ChatGPT into the service without sharing any user data, and is similarly working to add new partners.
Here’s the big deal: Apple’s latest AI-powered features will only be available on the iPhone 15 Pro, iPhone 15 Pro Max, or the next generation of iPhones expected to be released this fall. This could fuel a massive upgrade cycle. It is estimated that over 93% of existing iPhone users do not currently have a compatible device.
I think it’s unlikely there will be hundreds of millions more upgrades this year, though. For starters, Apple’s AI won’t be available outside the United States. But there could be a slight increase in sales and average selling price, and that increase could continue for several years as Apple improves its AI features and makes its new devices more attractive.
A larger-than-expected upgrade cycle this fall could push Apple stock to a market cap of $4 trillion. The combination of strong iPhone and services revenue with its massive share repurchase program should produce strong EPS growth supporting a higher stock price.
Which will reach $4 trillion first?
If I had to bet on a company reaching a $4 trillion market cap, it would be Microsoft. The company’s position in enterprise software is unrivaled, giving it a massive platform to sell new AI capabilities. Additionally, its partnership with OpenAI makes it a top choice for developers looking to access its large language models and create new AI applications. There is a long period of growth ahead for Microsoft despite its already massive size.
But Nvidia or Apple could reach $4 trillion faster if they produce better-than-expected results in the near term. Despite the long-term challenges for Nvidia, the short term looks promising. But its share price already has considerable upside potential, with a forward price-to-earnings (P/E) ratio in excess of 50 times. Apple, meanwhile, is more stable and could benefit from new growth catalysts related to strong iPhone sales and additional AI partnerships.
I think Apple has a good chance of hitting $4 trillion initially, but it’s far from guaranteed. He and Microsoft seem like great investments, even at this price. Nvidia is much riskier given its customer concentration and current valuation.
Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Levy holds positions at Apple, Meta Platforms and Microsoft. The Motley Fool holds positions and recommends Apple, Meta Platforms, Microsoft, Nvidia and Tesla. 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.