1 Extraordinary Stock Joins Microsoft, Apple, Nvidia and Alphabet in the $2 Trillion Club - Latest Global News

1 Extraordinary Stock Joins Microsoft, Apple, Nvidia and Alphabet in the $2 Trillion Club

This year, two new companies’ market caps have already surpassed $2 trillion, and a third company is on the verge of reaching that milestone.

The current members of the $2 trillion club are among the most respected names in their field, and all of their businesses revolve around technology.

  • Microsoft ($3 trillion) has established itself as a leading AI provider with a smart investment in OpenAI. This benefits the Azure cloud computing platform and the company’s enterprise software business.

  • Apple ($2.8 trillion) sells the iPhone and operates a growing ecosystem of services around its devices.

  • Nvidia ($2.2 trillion) is at the forefront of the AI ​​trend as a supplier of the most sought-after chips for training large language models.

  • alphabet ($2.1 trillion) owns the most popular search engine Google, operates a massive advertising business and one of the largest cloud computing platforms on the market.

The next company likely to join them also invested heavily in technology, including cloud computing and digital advertising. But its core business, retail, also has great potential for profit growth. This company is Amazon (NASDAQ:AMZN).

A graph showing a finger tracing an upward acceleration line.

Image source: Getty Images.

Trends are driving Amazon to $2 trillion

Three key Amazon businesses benefit from different trends. But investors shouldn’t discount the operational excellence of Amazon’s management team to capitalize on these trends.

Amazon is a major player in the booming AI trend. As demand for generative AI capabilities grows, the cloud computing segment Amazon Web Services (AWS) is expanding its capabilities to meet this demand.

CEO Andy Jassy says he likes to look at AI development in three layers. At the base level, Amazon offers developers compute instances with Nvidia GPUs and its own custom Trainium 2 chips. It also offers a service, SageMaker, that makes training a large language model easier by managing customer training data. At the mid-level, Amazon Bedrock offers it for anyone who wants to build on existing large language models. Developers can extend existing models and create custom AI apps using Bedrock’s toolset. At the top level are existing AI-powered applications running in the cloud.

All three levels contributed to the renewed acceleration of Amazon Web Services’ revenue growth. The segment’s revenue exceeded $100 million in the first quarter.

The second trend is digital advertising. Even though digital advertising is widespread today, it remains an opportunity for Amazon. The company has seen great success with its sponsored product listings. In January, Prime Video began including video ads by default, providing another opportunity for revenue growth. However, management still says it sees growth opportunities in its core display advertising business.

Its advertising revenue rose 24% year-over-year in the most recent quarter, topping $49 billion over the trailing 12 months.

Amazon’s original business, online retail, remains a major opportunity. Despite the relatively slow growth in online store sales, third-party services, and subscription services (which largely consist of Prime memberships), the real story is the increasing operating margin. The operating margin in North America rose to 5.8% from 1.2% in the previous year. This margin expansion was driven by more efficient shipping operations as Amazon overhauled its logistics network. International operating income turned positive in the first quarter, an important milestone for the company.

Small improvements in operating margin can make a big difference when a company generates $500 billion in annual revenue.

Amazon’s path to a $2 trillion market cap

As of this writing, Amazon’s market capitalization is just under $2 trillion. For the company to reach this milestone, the stock only needs to gain 3%, and that could happen any day. Given the significant trends driving the company’s business and its operational successes, it shouldn’t take long for the market to hype it up.

This is especially true when you consider that the stock trades at a fair valuation. The company’s enterprise value to sales ratio is 3.2, and analysts on average expect sales growth of 11% both this year and next. But with the operating margin rising, the company should deliver earnings and free cash flow growth that far exceeds revenue growth. And its price-to-free cash flow ratio of around 40 looks downright cheap compared to Amazon’s historical values.

At the current price, Amazon has a chance to surpass the $2 trillion valuation and never look back.

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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. Adam Levy has held positions at Alphabet, Amazon, Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

1 Extraordinary Stock Set to Join Microsoft, Apple, Nvidia and Alphabet in $2 Trillion Club was originally published by The Motley Fool

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