Three AI Stocks Poised to Reach a $1 Trillion Market Cap in Surprise Turn of Events

Three AI Stocks Poised to Reach a  Trillion Market Cap in Surprise Turn of Events

Artificial intelligence (AI) is a transformational technology. Thanks to AI, some established companies will develop additional revenue streams, while others will struggle to find their place in the new business and technology environment.

However, other companies, often not considered as AI Actionscould grow rapidly and possibly emerge out of nowhere to become a market capitalization of 1,000 billion dollars and beyond. While it’s difficult to accurately predict which growth stocks will reach such a milestone, three Motley Fool contributors have thoughts on which of these less obvious AI stocks can grow their market caps beyond $1 trillion. dollars.

An Old-School Tech Stock Benefits from the AI ​​Revolution

Jake Lerch (Oracle): My choice is Oracle (NYSE:ORCL)thanks to the resurgence of its cloud business, fueled by growing demand for artificial intelligence data servers.

During the company’s latest earnings conference call (for the three months ending February 29), Oracle Chairman Larry Ellison was very direct in admitting that MicrosoftThe explosive growth of cloud computing is driving massive success for Microsoft vendors, including Oracle. “We’re building 20 data centers (for) Microsoft and Azure. They just ordered three more data centers this quarter,” Ellison said.

In turn, Oracle’s overall revenue increased 7% year-over-year in its most recent quarter, to $13.3 billion. Better yet, management gave optimistic guidance, indicating that future sales targets could be achieved sooner than expected, with the company’s cloud services segment seeing 25% year-over-year growth.

As for the company’s stock, it might come as a surprise that Oracle is already the 20th largest U.S. company with a market cap of $345 billion, making it more than twice the size of iconic companies like Verizon, caterpillarAnd American Express.

Perhaps what’s more shocking, especially for those of us who lived through the stock’s total collapse in the wake of the dot-com bubble, is that Oracle has actually been a solid investment for over a decade . In fact, Oracle shares outperformed the S&P500 During the last decade.

Three AI Stocks Poised to Reach a  Trillion Market Cap in Surprise Turn of Events

ORCL Total Return Level Chart

So perhaps it’s time for investors to take another look at Oracle. Thanks to its hot cloud activity, this Web 1.0 the name could be on track to reach a $1 trillion market cap.

TSMC doesn’t get the credit it deserves

Justin Pope (Taiwan Semiconductor Manufacturing): Semiconductors have become the building blocks of AI; the chips power the huge computers needed to analyze data to train AI models. Nvidia, the current king of AI chips with most of the market share, has annual revenue of just over $60 billion company-wide. Lisa Su, CEO of Advanced microsystemsrival Nvidia, estimates that the AI ​​chip market will reach $400 billion in the next few years.

Although they are well-known chip giants, neither Nvidia nor AMD actually make their chips. This work belongs to manufacturing specialists like Semiconductor manufacturing in Taiwan (NYSE:TSM). TSMC is the world’s largest semiconductor manufacturer, with an estimated 56% share of global chip production. As the market leader, you can be sure that TSMC is the benchmark for these new, highly advanced chips that power the latest innovations like AI.

The market isn’t really sleeping on TSMC stock. After all, the company is now worth more than $600 billion. However, its price remains reasonable, at 23 times analysts’ estimated 2024 earnings of $6.17 per share.

Think about it. If demand for semiconductors pushes the AI ​​chip market to such massive growth (several times its current size if Lisa Su is right), much of that activity will trickle down to TSMC. It’s not a stretch to see the company’s profits doubling over the next decade, which would be more than enough to push TSMC past a trillion-dollar market cap.

The future looks bright for the world’s first chip manufacturing plant, and a multibillion-dollar valuation seems more a matter of When not if.

This travel stock should continue to see gains thanks to AI

Will Healy (Airbnb): Most consumers see Airbnb (NASDAQ:ABNB) as a tourism business, and understandably so. It has disrupted the vacation rental industry, turning any residence into a potential vacation property. Moreover, it has strengthened this reputation by offering activities likely to appeal to vacationers.

Still, many customers and even some investors would likely be surprised to learn that Airbnb likely owes its success to AI. On the one hand, it’s not a first mover in this space. This statement belongs to ExpediaIt’s Vrbo. Furthermore, unlike a hotel chain like Hiltonhe does not own the properties he helps rent out.

In reality, Airbnb is little more than a listing website with a high level of awareness. The company strengthens its competitive advantages with AI. Technology helps address challenges such as determining appropriate price levels in a given area or estimating the reputation of potential tenants.

Airbnb has also found unusual applications for AI. Technology plays a role in enforcing restrictions on vacation activities and estimating the likelihood that a renter will violate these rules.

Additionally, Airbnb has started testing its AI chatbot to respond to many customer support requests. To that end, it recently purchased GamePlanner, a company that can presumably make AI experiences on Airbnb more human-like.

Additionally, the company could be closer to a $1 trillion market cap than some might assume. Thanks to its 7.7 million registrations and 448 million room nights and experiences booked in the fourth quarter of 2023 alone, the stock has already reached a market capitalization of $105 billion, meaning it needs to double about 3.2 times to bring the market capitalization to $1 trillion.

Of course, such a feat will probably take a few years, as the market capitalization will still need to increase almost ninefold to reach this milestone. Additionally, Airbnb’s P/E ratio of 23 was skewed downward by a one-time tax benefit, making its true earnings-based valuation higher than it appears.

However, its price-to-sales ratio of 11 is not far from a record low, a factor that should serve as a catalyst as revenues and profits continue to rise. As AI continues to increase business productivity, a $1 trillion market cap should eventually be within reach.

Should you invest $1,000 in Oracle right now?

Before buying Oracle stock, consider this:

THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Oracle wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.

Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor The service has more than tripled the performance of the S&P 500 since 2002*.

See the 10 values

*Stock Advisor returns March 11, 2024

American Express is an advertising partner of The Ascent, a Motley Fool company. Jake Lerch holds positions at Airbnb, Caterpillar and Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy holds positions in Advanced Micro Devices. The Motley Fool holds positions and recommends Advanced Micro Devices, Airbnb, Microsoft, Nvidia, Oracle and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Verizon Communications and 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.

3 Surprise AI Stocks Heading Towards $1 Trillion Market Cap was originally published by The Motley Fool

Source Reference

Latest stories