Meet the 3 Supercharged Growth Stocks That Will Be Worth $4 Trillion by 2025, According to a Wall Street Analyst

One of the clearest secular winds of the past two years is the rise of artificial intelligence (AI). Recent advancements in the field have contributed to the continued growth of the market as these state-of-the-art algorithms promise to increase productivity by managing mundane tasks and streamlining productivity.

It should come as no surprise that many of the world’s most valuable companies are at the forefront of AI development and have embraced the potential of generative AI. One of the biggest debates in tech circles is which of these tech geeks will be the first to break the $4 trillion market cap mark.

Investors asking that question may be missing the point, according to Wedbush analyst Dan Ives, who argues that 12 months from now, the $4 trillion club may actually have three members. Let’s take a look at the candidates and what might get them there.

Image source: Getty Images.

1. Apple

With the largest current market cap in the world at over $3.4 trillion (at the time of writing), Apple (AAPL 0.12%) is among the most likely contenders to be a founding member of the $4 trillion club. It would take a share price increase of less than 17% to put Apple over the finish line, and there are plenty of drivers that could help propel the iPhone maker higher.

The most obvious potential catalyst is, of course, the recently unveiled iPhone 16. The latest version of the fan-favorite device comes with all the usual upgrades, including an improved camera, faster processing and increased battery life. One of the biggest draws, however, is the debut of Apple Intelligence, the company’s AI-powered suite of generative tools that will likely draw technophiles in droves.

There’s more: The runaway inflation of the past two years has made consumers hang on to their iPhones a little longer, and Ives estimates there are 300 million iPhones that haven’t been updated in four years or more much, which led to a lot of apprehensions. request. He believes this will kick off the next supercycle and estimates that Apple could sell as many as 240 million iPhones next year.

Given the improving macroeconomic conditions, I think the analyst is right: droves of consumers will flock to the new AI-powered iPhone, helping Apple surpass the $4 trillion mark.

2. Microsoft

Microsoft (MSFT -0.76%) it is currently the second most valuable company in the world. With a market cap of $3.2 trillion, the stock will only need to rise 24% to break the $4 trillion mark.

The company quickly recognized the game-changing nature of generative AI and positioned itself for success. Microsoft has taken a stake in ChatGPT creator OpenAI and developed a suite of artificial intelligence-based productivity tools called Copilot. It recently unveiled a line of Copilot-powered personal computers that will help expand Microsoft’s already extensive reach.

Just last month, the company announced that it would restructure the reporting of its business units to provide a clearer picture of its success in AI. While investors don’t yet have the full picture, the available evidence is compelling. During Microsoft’s fiscal fourth quarter 2024 (ended June 30), Azure Cloud grew 29% year-over-year, and management noted that eight percentage points of that growth was the result of demand for its services by AI. This helps illustrate that Microsoft’s AI strategy is paying off.

Ives took a point from management’s commentary, noting that Azure Cloud growth is expected to “accelerate in the second half.” He estimates that in the next three years, 70% of Microsoft’s installed base will use its AI solutions. He goes on to say that this opportunity is not yet fully factored into the share price.

I think the analyst hit the nail on the head. Given Microsoft’s extensive reach in both consumer and enterprise markets, it won’t take much in terms of AI adoption to positively impact the company’s growth.

3. Nvidia

Nvidia (NVDA -2.13%) has become the de facto poster boy for the AI ​​revolution, sending its market cap to just over $3 trillion. As such, it would only take a 32% share price increase to take the chipmaker past $4 trillion.

The stock is currently 10% off the top as investors weigh in on the momentum of AI adoption, but the evidence is undeniable. Nvidia’s biggest customers — Microsoft, Meta platforms, Amazonand Alphabet — have been completely transparent about their plans to increase their capital spending for the rest of the year and into 2025. They’ve also made it very clear that the vast majority of that spending will be dedicated to the data centers and servers needed to run the AI.

Nvidia’s graphics processing units (GPUs) are the gold standard for running AI in the data center and controlled 98% of the data center GPU market last year. This illustrates why continued investment in the space would benefit Nvidia.

Ives cited rising chip demand, clarity on the upcoming release of its Blackwell chip, and a strong outlook as evidence that Nvidia stock still has some way to go.

I think the analyst rating is perfect. Investors have been concerned that AI adoption could slow, which has hurt Nvidia’s stock in recent months. However, while this will certainly happen one day, the available evidence suggests that it will not happen anytime soon. In fact, some believe that Nvidia will eventually be the most valuable company in the world.

A word about evaluation

Excitement about the potential of AI since the beginning of last year has driven many stocks higher, leading to a corresponding increase in their respective valuations. As such, each of these stocks trades at a premium to the broader market. Microsoft and Apple currently trade at around 33 times forward earnings, compared to a multiple of 30 for S&P 500. Nvidia is the most egregious example, selling at 43 times forward earnings. That said, looks can be deceiving.

Analysts’ consensus estimates for Nvidia’s fiscal 2026 earnings per share (which starts in January) are $4.02. On that basis, Nvidia trades at just 30 times sales, so it’s not as expensive as it might seem, especially given the continued opportunity AI represents. Using expectations for the next fiscal year yields similar results for Apple and Microsoft, which trade at 30 and 28 times next year’s expected earnings, respectively.

When viewed in this light, these tech titans are actually reasonably priced. That’s why each of these stocks is a must-have for the AI ​​revolution.