Nvidia could become a $3 trillion company by the end of 2024, and Alphabet could join the club by the end of 2025.
Nvidia (NVDA 0.69%) And Alphabet (GOOGL -0.17%) (GOOG -0.28%) has generated what can only be described as monstrous returns for shareholders over the past five years. Shares have jumped 2,490% and 195%, respectively, while S&P 500 (SNPINDEX: ^GSPC) has only increased by 80%.
Better yet, this outperformance could continue in the coming years. Nvidia and Alphabet should benefit as companies invest in artificial intelligence infrastructure, to the point where they could join Microsoft And Apple as members of the elite $3 trillion club in the near future.
Here’s what investors need to know.
Nvidia Could Be a $3 Trillion Company by the End of 2024
Nvidia currently has a market cap of $2.7 trillion, which means shares would have to rise 11% for the company to reach a $3 trillion valuation. That could happen by the end of 2024. My reasoning is simple: Nvidia graphics processing units (GPUs) are the industry standard for accelerating complex data center workloads like artificial intelligence (AI), and companies are spending money first when it comes to AI.
Let’s take for example five major cloud computing companies: Alphabet, Amazon, Meta-platformsMicrosoft and Oracle — will record $181 billion in capital expenditures (capex) this year, according to JPMorgan Chase estimates. This implies a 36% growth in capital expenditure, a substantial acceleration from last year’s 10% growth, mainly due to the development of AI infrastructure.
Few companies (if any) will benefit as much from this shift as Nvidia. The chipmaker holds 98% of the data center GPU market share and up to 95% of the AI processor market share, according to Mizuho Securities. Nvidia is also gaining ground in other data center hardware categories. Its Grace central processing unit (CPU) is on track to become a multibillion-dollar product line, and its InfiniBand/Ethernet networking platforms are already a multibillion-dollar business.
Indeed, Nvidia could cross the $3 trillion threshold when it reports its second-quarter results on August 28. Wall Street has underestimated sales and profit growth in each of the past four quarters. Another low estimate could send the stock soaring, and such an outcome seems plausible. CFO Colette Kress recently said that demand for H200 and Blackwell GPUs is “well above supply, and we expect demand to outstrip supply well into the next year.”
Blackwell GPUs are cutting-edge chips that can accelerate AI training and inference by factors of four and thirty, respectively, over the previous generation of Hopper. They are also more power efficient, reducing the total cost of ownership by a factor of 25. CEO Jensen Huang recently told investors, “The Blackwell architecture platform will likely be the most successful product in our history.”
Wall Street expects Nvidia to grow its earnings per share by 34% per year over the next three years. So its current valuation of 66 times earnings seems pretty reasonable, and it puts a $3 trillion valuation within reach. In fact, assuming earnings grow as fast as analysts expect, Nvidia would be a $4 trillion company by 2026, even if the stock trades at a more reasonable 45 times earnings.
Alphabet Could Be a $3 Trillion Company by the End of 2025
Alphabet currently has a market cap of $2.1 trillion, meaning the stock price would need to increase by 43% for the company to reach a valuation of $3 trillion. This could happen by the end of 2025. Alphabet is the world’s largest ad tech company and the third-largest cloud infrastructure provider. Grand View Research expects these markets to grow at 22% and 21% annually, respectively, through 2030.
Based on this, Alphabet has invested billions of dollars in developing AI products over the years. Forrester Research recently recognized its dominance in AI infrastructure solutions, and the company is putting this expertise to work in its adtech and cloud computing businesses.
Alphabet recently added a conversational feature to Google Ads that allows brands to create natural language campaigns. The company also introduced AI-powered image generation and profit optimization tools to increase conversion rates. These innovations should help advertisers keep Google at the top of the list. Additionally, CEO Sundar Pichai says AI insights in Google Search drive engagement and increase user satisfaction, which should ease concerns about the company losing market share in internet search.
Alphabet has also attracted more than 1.5 million developers to Google Cloud with Gemini, a multimodal model that can process language, images, video, audio, and computer code. The company monetizes Gemini in several ways. For example, Gemini powers a conversational assistant that automates tasks in Google Workspace apps, and it powers a conversational assistant that accelerates coding projects. Additionally, Gemini can be fine-tuned and used to build custom generative AI applications.
Investment bank UBS recently released a report (Artificial Intelligence: Sizing and Seizing the Investment Opportunity) that divides the AI value chain into three layers: the enabling layer, the intelligence layer, and the application layer. UBS analysts wrote, “We see the largest near-term opportunities in the enabling layer,” which includes semiconductor companies like Nvidia and cloud companies like Alphabet.
Against this backdrop, Wall Street expects Alphabet to grow its earnings per share by 17% per year over the next three years, while the stock trades at a relatively cheap valuation of 24 times earnings. By comparison, Wall Street expects Microsoft to grow its earnings per share by 14% per year, while the stock trades at a relatively high valuation of 37 times earnings.
If Alphabet delivers on these expectations and the market values the stock at the same level as Microsoft, it will be a $4 trillion company by the end of 2025. In this context, reaching $3 trillion is easily achievable, and investors should consider buying a position in the stock today.
Randi Zuckerberg, former head 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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, JPMorgan Chase, Meta Platforms, 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.