Change is perhaps the only certainty on Wall Street. Due to factors such as innovation, competition, mergers and acquisitions, bankruptcy, and legal judgments, the puzzle pieces that make up The largest publicly traded companies are constantly in flux.
When 2004 ended, S. ExxonMobil The largest publicly traded company in S&P 500with Citigroup And General Electric Also in the top 10. today, Microsoft(NASDAQ: MSFT ) The only member of the top 10 at the end of 2004 is still one of America’s largest publicly traded companies.
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From the midpoint of 2023, we have witnessed apple(NASDAQ: AAPL )Microsoft, and the semiconductor colossus nvidia(NASDAQ: NVDA ) All exceed the $3 trillion value plateau. However Nvidia seems like the surest bet to reach the psychologically significant $5 trillion level Artificial Intelligence (AI)A dark horse candidate may have the clearest path to becoming Wall Street’s first $5 trillion company.
On the one hand, it cannot be denied that Nvidia has enjoyed a textbook operational expansion. The company’s Hopper (H100) graphics processing units (GPUs) and successor Blackwell chips have been the preferred choice for businesses looking to run generative AI solutions and train large language models in their high-compute data centers.
With demand for the heavy supply of GPUs, Nvidia has commanded $30,000 to $40,000 for its Hopper chip, more than four times that. Advanced Micro Devices has charged customers for its Instinct MI300X GPU. Having second-hand pricing power helped lift Nvidia’s gross margin to 78.4% last year.
While the long-term outlook for AI remains encouraging and the technology has real-world applications in most industries around the world, Nvidia’s chances of becoming Wall Street’s first $5 trillion company are likely to be thwarted by history.
About three decades ago, the Internet began to go mainstream and offered businesses a new way to connect with potential customers. Although the Internet eventually changed the trajectory of growth for corporate America, in a positive way, it took years for businesses to really understand how to use these new sales and marketing channels.
Every game-changing technology or innovation for 30 years has navigated its way through an early-stage bubble, including the Internet. Simply put, investors constantly predict how quickly a new technology/innovation will be adopted or gain widespread use. Most companies lack clear game plans for how they will maximize the return on their AI investments, setting artificial intelligence up to be the next in a long line of bubbles.
Since no company has benefited more directly from the AI revolution than Nvidia, the logical expectation is that its stock will be hit the hardest. Historical precedent makes it unlikely that Nvidia will climb to a $5 trillion valuation first.
Image source: Amazon.
If history rhymes and the AI bubble bursts, it will also be bad news for Microsoft, which is investing heavily in an artificial intelligence-driven future. While Microsoft’s operating cash flow isn’t as heavily dependent on AI as Nvidia’s, being the first to reach a $5 trillion valuation would be a stretch.
The same can be said for Wall Street’s other $3 trillion public company, Apple. Although Apple’s services segment continues to grow at double-digit percentages, sales of its physical devices, including the iPhone, have stagnated for two years. Apple stock is already trading at one of its most expensive valuations in a decade, leaving little room for another $1.4 trillion increase in its valuation.
The “Magnificent Seven” component that seems to be the clearest path to a $5 trillion market cap is the e-commerce juggernaut. Amazon(NASDAQ: AMZN ).
When most consumers and investors hear the name Amazon, they think of its leading online marketplace. Last February, eMarketer estimated that Amazon would account for just 40% of US online retail sales in 2024. While this online retail platform has been the face of Amazon for nearly three decades, e-commerce plays a lesser role in terms of cash flow. Production and operating income.
The bulk of Amazon’s growth potential (especially cash flow growth) stems from its subsidiary operating segments, with Amazon Web Services (AWS) leading the pack.
Based on data from tech-analysis firm Canalys, AWS is the world’s leading cloud infrastructure service platform, accounting for an estimated 33% of total cloud spending during the third quarter of 2024. For context, Amazon has a share of spending among cloud-service providers. More than Microsoft’s Azure and the alphabetof google cloud, combined — and it’s Nos. 2 and 3 in global cloud-service spending.
Although AI played a role in AWS’s growth, enterprise spending on cloud services was growing at a steady double-digit pace while AI became the hottest thing since sliced bread on Wall Street. With enterprise cloud-service spending still in the relatively early stages of its expansion, Amazon can expect high enough margins from this segment to meaningfully boost its cash flow.
In addition to AWS, Amazon’s advertising services and subscription services (e.g., Prime) segments are also growing at double digits, respectively. Amazon’s foray into exclusive sporting events (Thursday night football and NBA streaming packages) should improve advertising demand, as well as support its subscription pricing power.
The bottom line is that, unlike Microsoft and Nvidia, Amazon won’t be dragged down by the AI bubble bursting because of an abundance of other catalysts.
Finally, Amazon remains historically cheap. During the 2010s, investors willingly traded their shares of the company for 23 to 37 times year-end cash flow. But as of the closing bell on Jan. 10, Amazon shares are valued at just 13.5 times consensus cash flow for 2026. If Amazon were to reach multiples of cash flow by mid-year, it would trade continuously from 2010 to 2019. Became Wall Street’s first $5 trillion company.
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Citigroup is an advertising partner of Motley Fool Money. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Sean Williams There are positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft and Nvidia. The Motley Fool recommends GE Aerospace and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. Motley Fool has a Disclosure Policy.
