Whether you realize it or not, change is commonplace on Wall Street. It might seem like a given that today's largest companies by market cap will retain their position in the future, but history has shown that innovation and execution shake-up the world's biggest companies with frequency over time.
Back in 1999, Nokia, General Electric, and Intel, were among the largest publicly traded companies. Today, Microsoft is the only remaining member of the 10 largest publicly traded companies in 1999.
Image source: Getty Images.
Apple is the kingpin... for now
At the moment, tech stock Apple (AAPL -0.35%) sits at the top of the pecking order with a market cap of $2.71 trillion.
In many respects, it deserves to be No. 1. Apple produces the most-popular smartphone sold in the U.S., and saw its sales and profits surge to record levels after introducing 5G capability to its iPhone. The company's customer base is also extremely loyal, as evidenced by the lines that wrap around its stores anytime a new or updated product makes its debut.
Apple's push into subscription services should be a winning proposition as well. This transition, which is being led by CEO Tim Cook, can help soften the revenue lumpiness associated with Apple's product replacement cycles, as well as lift margins over time.
The company is also a cash cow. Over the trailing 12-month period, Apple generated more than $112 billion in operating cash flow. With such robust cash generation, Cook has overseen a substantial capital return program via share buybacks and dividend growth.
These could be the world's largest stocks by 2035
But history is pretty clear that change is normal among the largest publicly traded companies. By the time 2035 rolls around, the following three companies might all be worth more than mighty Apple.
Image source: Amazon.
The no-brainer choice: Amazon
Although Microsoft would appear to be the most-logical company to surpass Apple in market value by 2035, I'd wager that e-commerce giant Amazon (AMZN 3.43%) is the better bet to be the largest publicly traded company in the world in 14 years' time.
As many of you probably know, Amazon's popularity stems from its dominant online marketplace. This past August, eMarketer estimated that Amazon would bring in 41.4% of all online retail spending in the U.S. in 2021. That was nearly six times the share of Walmart, which is the No. 2 in U.S. online retail sales.
Keep in mind that retail operating margins tend to be razor thin. Amazon accounts for this by pushing its Prime subscriptions, which were just raised $20 to $139 annually. The fees collected from the company's 200 million global Prime members provides a healthy buffer that allows Amazon to undercut its competition on price.
But as I've pointed out previously, it's not Amazon's popularity in e-commerce that would be expected to fuel its push higher. What's far more important is that the company's higher-margin operating segments haven't shown any signs of slowing. In particular, Amazon Web Services (AWS) accounts for almost a third of global cloud infrastructure spending. Last year, AWS brought in nearly three-quarters of Amazon's operating income despite accounting for around 13% of net sales.
As long as Amazon's high-margin segments, such as AWS, subscriptions, and advertising, don't considerably slow down, Amazon could be worth more than Apple by 2035.
Image source: Getty Images.
If everything went just right: Nvidia
Another company with all the tools and intangibles necessary to be worth more than Apple in 14 years, but which'll require a lot of things to go right for that to happen, is graphics and networking stock Nvidia (NVDA 6.18%).
Right now, virtually everything is going right for Nvidia, and it would need to stay that way for more than a decade if it's going to become one of the world's most valuable companies. For fiscal 2022, the company's bread-and-butter gaming segment saw sales jump 61% on the heels of growing demand, innovation, and strong pricing power.
Meanwhile, data center sales increased 58%, compared to fiscal 2021. In the wake of the pandemic, businesses are moving their data into the cloud at a faster pace than ever before. This has vastly improved the growth trajectory for Nvidia's data center solutions, with this higher-margin segment likely to leap gaming in annual revenue in the not-too-distant future.
But the real wildcard here is the company's professional visualization segment, which accounted for $2.11 billion of its $26.9 billion in total sales last year. This $2.11 billion in sales represents a cool 100% increase from the previous year. This segment is viewed as Nvidia's springboard into the metaverse -- i.e., the next iteration of the internet that'll allow users to interact within 3D virtual environments. Though estimates vary, most analysts believe the metaverse has multitrillion-dollar potential. Providing tools that allow users to interact in virtual spaces, supplying solutions to support data centers, and being a leader in graphics cards, gives Nvidia a pole position to the development of the metaverse.
If the metaverse matures quicker than anticipated, Nvidia could very well leapfrog Apple.
Image source: Airbnb.
The longshot: Airbnb
Now, if you want a true longshot that could come from much further down the market cap list to surpass Apple in 14 years' time, look no further than stay-and-hosting platform Airbnb (ABNB 0.75%).
For the time being, Airbnb's marketplace has in the neighborhood of four million hosts. But this should be viewed as just as the tip of the iceberg. There are more than 30 times that many households in the U.S., and somewhere around 1 billion homes worldwide. Once owners realize how simple it is to generate cash flow from their home(s) by listing them on Airbnb, we should see a significant increase in marketplace listings. For what it's worth, bookings more than quintupled in the three years leading up to the pandemic.
Also of note, Airbnb's fastest-growing segment is long-term stays, which are defined as stays of at least 28 days. The pandemic completely disrupted physical workplaces and made a sizable percentage of the labor force realize they could work from anywhere, so long as they had an internet connection. With workers not tied down to any one location, the rise of the mobile worker could become a major profit driver for Airbnb.
Furthermore, the company is relying on more than just marketplace bookings to drive top-and-bottom-line growth. Airbnb wants its piece of what's estimated to be an $8 trillion travel industry. Introducing Experiences, which allows local experts to take travelers on adventures, is one way Airbnb is attempting to capture a larger percentage of travel spending. But it's likely just the beginning. Airbnb could extend branches to the transportation or restaurant industries to control a larger percentage of what travelers are spending.
If Airbnb's rapid growth trajectory picks up where it left off prior to the pandemic, Apple could well be in its sights by 2035.
