Over the past two years, Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) have all achieved something that their publicly traded peers haven't -- they've reached a market cap of $1 trillion or higher.

The merit of such a milestone is debatable. After Microsoft crossed $1 trillion, its CEO Satya Nadella said, "I would be disgusted if somebody ever celebrated our market cap" and added that the milestone was "not meaningful."

To that point, publicly traded companies are valuable for how they grow their business, generate value for their investors, earn profits, and disrupt industries -- not because they earn high valuations. But obtaining a $1 trillion valuation does indicate that these companies are doing something right, so let's take a look at how Apple, Amazon, Microsoft, and Alphabet are dominating their respective markets. 

Image of dollar that looks like an arrow.

Image source: Getty Images.

Apple's ongoing transformation

Apple reached a $1 trillion market cap in August 2018 and has pushed past that with its current valuation of about $1.4 trillion.

While some investors have been pessimistic about Apple's prospects as its iPhone sales decline, the company has proved that its staying power goes far beyond the smartphone market. 

For example, Apple's wearable devices, which include its Airpods and Airpods Pro, its Beats by Dre lineup, and its Apple Watch, have seen massive success, with sales in the company's Wearables, Home, and Accessories division increasing 54% in the fourth quarter of 2019. Apple is the undisputed leader in ear-worn wearables and smartwatches, and there's evidence the company has more room to grow in this market. Research firm Gartner estimates that consumer wearable tech spending will increase by 55% between now and next year, and the two biggest categories will be the ones Apple already dominates -- ear-worn devices and smartwatches.

Aside from wearables, Apple is proving its worth by moving into new areas of growth with its services business. Apple's services include everything from the App Store, Apple Music, Apple TV+, Apple News, Apple Pay, and more. The company grew services revenue by 18% in the fourth quarter -- accounting for 19.5% of the company's total sales -- and with Apple still in the early stages of its services pursuits, there's likely more growth coming from this business. 

Apple's past dominance has come from decades of building premium devices and software, but the company's future growth likely lies in its recurring revenue from subscription services and a burgeoning wearable tech industry. 

Amazon's retail and cloud dominance

Amazon's market cap popped to $1 trillion just a month after Apple, but the online retailer hasn't stayed there -- Amazon's valuation is at about $941 billion right now

Amazon's rise has come from the company's continued dominance in the U.S. online retail market and the cloud computing space. About 38% of all U.S. online retail purchases occur on Amazon's platform, and the company's clever use of smart assistants, e-readers, tablets, and its Prime services keep users firmly locked into its growing ecosystem.

While Amazon's online retail business gets most of the attention, it's the company's cloud computing business, Amazon Web Services (AWS), that generates most of its profits. AWS is the leading cloud infrastructure company, with estimates of its market share varying between 30% and 40%. In the most recent quarter, AWS' operating income was $2.3 billion, compared to Amazon's North American retail operating income of $1.3 billion. 

Amazon is likely to continue benefiting from growth in the cloud, since the public cloud computing market is expected to be worth $331 billion by 2022. 

But don't think Amazon is only focused on online retail and cloud computing -- the company also has plenty of room to benefit from its growing advertising business.

Microsoft's rebound

Just six years ago, before Satya Nadella took over, Microsoft's valuation was roughly a quarter of its current $1.26 trillion market cap. As I mentioned earlier, Nadella is hardly impressed by this metric, but investors should be impressed with how he's led the company to new growth.

Shortly after Nadella took the reins at Microsoft, he predicted that the company's annualized commercial cloud revenue would reach $20 billion by the end of 2018 -- up from the $6.3 billion in sales at the time. Microsoft blew past its own goal ahead of schedule and hasn't looked back since.

Commercial cloud revenue, which includes the company's popular Azure cloud computing service, Office 365 subscriptions, and the company's customer relationship services product -- called Dynamics 365 -- now makes up more than one-third of Microsoft's sales.

Azure is one of the company's bright stars right now, with the business taking the No. 2 spot in the cloud computing market, behind Amazon. With Azure and the company's other commercial cloud services, Microsoft has built itself back into a formidable tech opponent. And that strength has helped bolster Microsoft's share price more than 350% since Nadella took over.

Alphabet's advertising dominance  

Alphabet reached a $1 trillion valuation this month after the company's share price began rising when Larry Page and Sergey Brin announced they were stepping back from leading Alphabet and putting Google's CEO, Sundar Pichai, in charge.

The leadership change has sparked some optimism from investors that Pichai may be more open to stock buybacks or could even announce the company's first dividend. But, of course, the company's real value lies in its online advertising dominance. Google, Alphabet's most important subsidiary, held 73% of the U.S. search advertising market last year, with its closest competitor, Amazon, taking 13%. 

The company has spent years perfecting its ability to collect data from users and then using that information to display targeted ads. The system works exceptionally well, and in the most recent quarter, Google's advertising business (of which search ads are a key element) accounted for 84% of Alphabet's total revenue.

While Amazon is beginning to challenge Alphabet in the search ad market, there's still little for Alphabet investors to worry about. Alphabet's massive lead in online advertising and its ability to serve up highly targeted ads based on user data should keep the company ahead of its competitors for years to come.

Valuations come and go 

Investors need to remember that even though it's interesting to see these companies reach a $1 trillion valuation, the metric isn't the best way to judge a company. Instead, focus on how strong a company's overall business is relative to its peers, whether or not it has good leadership that is heavily invested in the company, and look for companies that are focused on long-term growth. Fortunately for the companies above, they've managed to both achieve impressive market values and dominate in their respective sectors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.