A cursory glance at this list of the world’s largest companies by market capitalization yields some interesting data. There are currently only five companies valued at $1 trillion or greater.
Berkshire Hathaway (NYSE:BRK.B) occupies the 6th spot with a $711 billion valuation based on its public equity. I guess that Berkshire Hathaway is unlikely to be the next company to join the trillion-dollar club simply because it’s so heavily invested in U.S. companies, and the economy is increasingly likely to tank.
So, instead, investors should consider that the next 3 three companies on that list are the most likely to become the next trillion-dollar firms. And as an FYI, Apple (NASDAQ:AAPL) was the first company to reach that threshold back in the summer of 2018, and United States Steel (NYSE:X) was the first to be valued at $1 billion in 1901.
Nvidia (NASDAQ:NVDA) is currently the 7th most highly valued stock with a market cap of approximately $700 billion. The graphical processor unit (GPU) and chipset giant is an excellent case study of how quickly perception changes and how drastically that can affect a company’s value.
Nvidia was valued at less than $10 billion as recently as 2014. It has had an amazing run since then, increasing in value more than 70X in the interim.
That said, Nvidia isn’t currently at its highest valuation historically. That moment occurred in November of 2021, just prior to the onset of the tech downturn. Peak quantitative easing brought Nvidia above $820 billion then. The realization that runaway inflation would prompt what would be the most rapid series of rate hikes by the Fed sent NVDA plummeting.
Less than a year later, it was worth less than $300 billion. Slowing rate hikes combined with a heavy presence in AI and its application to computer graphics have NVDA back above $700 billion today.
That AI presence promises to push Nvidia north of $1 trillion. That probably won’t happen soon, as most of the hype is cooling. Instead, Nvidia will have to prove that AI-driven graphics can truly result in greater sales. That will or won’t push the company above that threshold for the first time ever.
Meta Platforms (META)
The company rebranded at the end of October to fully take advantage of the metaverse craze, which hasn’t really worked out. Its value dipped below $1 trillion before that announcement, and the tech collapse that ensued only made Zuckerberg’s rebrand look that much worse.
Recent data indicates that Meta’s VR losses continue to be a problem. Yet Zuckerberg remains intent on pursuing the strategy set in motion more than a year ago. Meta expects losses from the business unit this year to exceed the $13.7 billion that it lost last year.
None of that necessarily suggests that Meta then should be expected to rise from $600 billion to $1 trillion soon. But advertising revenues have surprised, and 2023 is the year of efficiency at the company. The company will be lighter by 21,000 people or more when all is said and done. A drive toward greater production with lowered headcount costs could drive it above $1 trillion again.
The rise and fall of Tesla’s valuation is pretty much the same story as that of the other companies above. Quantitative easing and pandemic-era spending resulted in an unsustainable period of largesse.
Tesla benefited from the EV craze that truly cemented the push toward electrification as more than a fad. The U.S. crossed the 5% new car EV sales tipping point in 2022. Once more than 5% of a country’s new car sales are EVs, conditions for mass adoption are in place. The U.S. was the 19th country to reach that threshold.
That has greatly benefited Tesla, which has pioneered mass EV adoption. It’s also worth noting that Tesla’s growth over the past decade would not have been possible had prevailing rates been higher. Lending was cheap, leading to a strong environment for growth stocks that persisted for a decade-long period.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.