Two tech heavyweights might soon become members of the prestigious trillion-dollar club. Nvidia has already gained entry into this elite club, a direct result of a remarkable rally fueled by the increasing interest in artificial intelligence (AI) this year. The elite club of publicly traded companies on US exchanges, boasting trillion-dollar valuations, includes Apple, Microsoft, Alphabet, and Amazon. However, a couple more tech firms are lining up, likely to gain entry into this esteemed club, which could present profitable opportunities for investors.
If you’re scouting for mega-cap stocks with impressive growth potential, continue reading as some contributors from Motley Fool delve into two tech frontrunners primed to achieve trillion-dollar market capitalizations.
TSMC: Set to Keep its Market Dominance
Often referred to as TSMC, Taiwan Semiconductor Manufacturing (NYSE: TSM) is the leading semiconductor foundry service globally. The company is the go-to manufacturing service provider for leading chip designers, including Nvidia, Apple, and Advanced Micro Devices.
With conservative estimates suggesting that the total semiconductor industry’s revenue will double at least in this decade, TSMC, the leader from Taiwan, is well-positioned to benefit from solid demand. The increasing need for high-performance chips for AI applications and data centers offers promising margin growth for the company’s sales mix.
Currently, TSMC holds over 60% of the global market for contract foundry services. A deeper look into the company’s dominant position in chip manufacturing reveals a more impressive picture.
Samsung is the second-largest player in the foundry market, focusing mainly on memory chip production. These chips usually offer relatively low margins compared to processors, mobile connectivity chips, and other semiconductor categories where TSMC leads.
In ultra-high-end chips powering AI and other high-performance applications, TSMC dominates over 90% of the contract fabrication market.
Despite a market cap of approximately $543.5 billion and a stock price down nearly 25.5% from its peak, TSMC remains a strong contender. The company achieved a market cap of roughly $730 billion early last year, and there’s a high probability it could rebound and continue its ascent.
With promising sales and profit tailwinds in sight and shares trading at about 21 times this year’s estimated earnings, TSMC has significant growth potential. While the share price will likely fluctuate with market and industry trends, it wouldn’t be surprising if TSMC gains entry into the trillion-dollar club within the next five years.
Meta Platforms: Poised for a Comeback
One growth stock that could soon become the trillion-dollar market cap club is Meta Platforms (NASDAQ: META). The company, previously known as Facebook, had passed this milestone but faced a downturn due to increasing competition from TikTok, Apple’s privacy-policy changes, and recession fears.
Despite these challenges, the company still has billions of daily active users across its apps, a proven track record of profit growth, and a comparatively affordable valuation.
As of March 31, Meta Platforms boasted 3 billion daily active users, marking a 5% increase from the previous year. With the recent launch of its new app, Threads, created as a Twitter competitor, the user base is expected to grow even further. The company’s apps are free to join, and Meta earns most of its revenue from ads viewed by its users.
The revenue model has proven to be highly lucrative for Meta. Over the past decade, Meta’s operating income surged from $2.8 billion to $28.9 billion. Even if the growth rate slows, the significant income can yield considerable shareholder returns.
The stock is not trading at an overly expensive valuation that’s growth-dependent. Meta’s stock is reasonably priced with a forward price-to-earnings (P/E) ratio of 21.6. The primary means to bridge the gap to a $1 trillion valuation from the current $800 billion would be a combination of earnings increases and P/E expansion.
TSMC and Meta: Trillion-dollar Prospects
TSMC and Meta Platforms, in addition to trading at P/E multiples with growth potential, are well-positioned to tap into trends that could significantly boost their profits beyond current levels.
These tech leaders stand out for investors eager to ride the wave of burgeoning mega-cap stocks. They have substantial chances of being the next to achieve the trillion-dollar valuation milestone.
TSMC and Meta Platforms present promising investment opportunities as they are primed to join the exclusive trillion-dollar club. Their current market positions, growth prospects, and reasonable valuations make them potential powerhouses in their respective fields. Investors seeking to capitalize on the trend of booming mega-cap stocks should consider these two tech leaders. Their potential to navigate and prosper from influential market trends might soon earn them the trillion-dollar valuation badge, joining the likes of Apple, Microsoft, Nvidia, Alphabet, and Amazon.
