Prediction: 2 artificial intelligence (AI) stocks will be worth more than Nvidia by 2029

Rockstar with artificial intelligence Nvidia currently has a market cap of $2.9 trillion, but the chipmaker has been bouncing back and forth around $3 trillion for several months. Only two other publicly traded US companies have exceeded this threshold: Apple and Microsoft.

looking ahead Amazon (AMZN 3.71%) and Alphabet (GOOGL 0.99%) (GOOG 1.05%) could surpass Nvidia’s current valuation to become $3 trillion companies by 2029. What that means for shareholders is detailed below.

• Amazon currently has a market capitalization of $1.9 trillion. Reaching $3 trillion by 2029 implies a total return of 58%, which equates to 10.7% annually over the next 4.5 years.
• Alphabet currently has a market capitalization of $2 trillion. Reaching $3 trillion by 2029 implies a total return of 50%, which equates to 9.4% annually over the next 4.5 years.

Here’s what investors should know about Amazon and Alphabet.

1. Amazon

Amazon has three major growth engines in e-commerce, digital advertising and cloud computing. Specifically, it leads the most popular online market in the US in terms of visitors and accounts for 41% of domestic e-retail sales. The company also has a vast logistics network that supports honorarium services for sellers and fast delivery for buyers, which strengthens its leading position.

Amazon is the world’s third-largest ad tech company, but it dominates retail media, a term that refers to digital advertising services provided by retailers. This matters because retail media is one of the fastest-growing verticals in the digital advertising market, according to eMarketer. In addition, Amazon recently unlocked a new revenue stream by introducing advertising on Prime Video.

Finally, Amazon Web Services (AWS) is the largest public cloud, and its market share increased by one point to 32% in the June quarter. These share gains reflect aggressive investments in artificial intelligence (AI) services. “Over the past 18 months, AWS has released more than twice as many machine learning and generative AI features into general availability as all other major cloud providers combined,” CEO Andy Jassy recently told analysts.

Looking ahead, eMarketer predicts that US retail e-commerce sales will grow 9% annually through 2028, while media retail spending will grow 24% annually over the same period. Meanwhile, International Data Corp. (IDC) expects public cloud spending to compound to 19% annually through 2028. This gives Amazon a good shot at double-digit sales growth over the next 4.5 years.

Here’s how Amazon could land a $3 trillion valuation by 2029: Today, the company is worth $1.9 trillion. Revenue could reasonably grow 12% annually through the end of 2028, in which case the company would reach a market value of $3 trillion if the stock traded at 3 times sales, a slight discount from its current valuation of 3.1 times sales.

2. The alphabet

Alphabet has two major growth engines in digital advertising and cloud computing. The company owns six products that serve more than two billion monthly users. The main ones are the most popular video streaming platform (YouTube) and the main search engine on the Internet (Google Search). These platforms allow Alphabet to efficiently collect information and provide consumers with data-driven advertising.

Alphabet will account for 27.4% of global digital ad spending this year, according to eMarketer. That puts the company more than five percentage points ahead Meta platformsthe second largest digital advertiser in the world. Importantly, while Alphabet is losing share on the open internet, its dominance in internet search and video streaming should keep it ahead of the competition for the foreseeable future.

Google Cloud, meanwhile, is the third largest public cloud, and its market share has grown by one point to 12% over the past year. These share gains reflect its status as a leader in AI infrastructure solutions and large language models. “To date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenue and are used by more than 2 million developers,” CEO Sundar Pichai told analysts on the second quarter earnings call.

Looking ahead, eMarketer predicts global digital ad spending will grow 10% annually through 2028, and IDC expects public cloud spending to grow 19% annually over the same period. That gives Alphabet a good shot at double-digit revenue growth over the next 4.5 years, with a potential upside from its subsidiary Waymo, a company that operates an autonomous transportation network in several U.S. cities.

Here’s how Alphabet could bring in a $3 trillion valuation by 2029. The company currently has a market cap of $2 trillion. Revenue could reasonably grow 10% annually through the end of 2028, in which case the company would reach a market value of $3 trillion if the stock traded at 6 times sales, a modest discount to its current valuation 6.4 times sales.